# Appendix — Blume v. Minnesota Mining & Manufacturing Co. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385010_0707%3A2 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1983 - **Citation:** 461 U.S. 939 ## Text 2h e Vourt, U.S, ities Marg. 22,1993 JAN 30-1992 No. G2-/L06 A 4rEVAS In the Supreme Court of the United States October Term, 1982 MINNESOTA MINING AND MANUFACTURING COMPANY, Petitioner, VS, WALTER S. BLUME and THE ELECTRODYNE COMPANY, INC., Respondents. APPENDIX TO PETITION FOR CERTIORARI TO UNITED STATES COURT OF APPEALS Tuomas V. KoyKKA Counsel of Record ArTER & HADDEN 1144 Union Commerce Building Cleveland, Ohio 44115 (216) 696-1144 SraNnLey G. DeLAHunNtT TERRYL K. QUALEY 2501 Hudson Road St. Paul, Minnesota 55101 (612) 733-1508 Attorneys for Petitioner Minnesota Mining ond Manufacturing Com- pany January 13, 1983 LL TAF GATES LEGAL PUBLISHING CO,, CLEVELAND, OHIO. -TEL, (216) 621-5647 TABLE OF CONTENTS Opinion of the Court of Appeals for the Sixth Circuit (July 7, 1982) 644 F.2d 1166, 215 U.S.P.Q. 585 ............ Al Opinion of District Court Vacating Temporary Re- straining Order (September 2, 1976) ..............00000+ Al6 Order of District Court on Bifurcated Trial (June 1, SN aE ahschinsik nies ccna acide ceaicahiheeaaea sna daiaaiaistangieas A23 Findings and Conclusions of Law of District Court on Bifurcated Trial (June 1, 1978) 533 F. Supp. 493 .... A24 Order of District Court Holding '675 Patent “Ob- I SEINE FWD steicissteicesnrscenticernincrcenenneeenivsians A84 District Court Findings and Conclusions of Law (Aug- er eee A87 Order of District Court for Judgment (August 22, IED = cium: Lisdbisalsiensiataceaseaccbnlaciiandianinceehicsadeilapiabcaseniniicsnes A146 Judgment of District Court (August 22, 1980) .............. A147 Judgment Entry of the Court of Appeals for the Sixth Cirewlt (Filed dualy 7, 1968) ....2.......ccecccsccsssscscsssssssccoes A148 Order of the Court of Appeals for the Sixth Circuit Denying Rehearing (October 21, 1982) .................... A150 Al APPENDIX OPINION OF THE COURT OF APPEALS FOR THE SIXTH CIRCUIT (Filed July 7, 1982) Nos. 80-3262, 80-3293, 80-3585 UNITED STATES COURT OF APPEALS For THE SIXTH CIRCUIT 684 F.2d 1166, 215 U.S.P.Q. 585 MINNESOTA MINING AND MANUFACTURING COMPANY, Plaintiff-Appellant, Plaintiff-Cross-Appellee, Vv. WALTER S. BLUME AND THE ELECTRODYNE COMPANY, INC., Defendants-Appellees, Defendants-Cross-Appellants. AppgaL from the United States District Court for the Southern District of Ohio. Before: Brown** and Jones, Circuit Judge, and Wuire, District Judge.* Jones, Circuit Judge. These consolidated appeals in- volve two patents, in the field of bonded magnets, owned *The Honorable George W. White, United States District Court for the Northern District of Ohio, sitting by designation. **The Honorable Bailey Brown retired from active service on June 16, 1982, and became a Senior Circuit Judge. A2 by Minnesota Mining and Manufacturing Company (3M). Walter S. Blume and the Electrodyne Company (defen- dants) appeal from judgments holding that Blume infringed 3M’s U.S. Patent No. 2,999,275 (275 patent) and thereby also breached an agreement not to compete (described by the district court as the “noncompete agreement’). 3M appeals from a judgment holding its U.S. Patent No. 3,235,675 (675 patent) invalid for obviousness.’ We affirm the judgments. Magnets may be divided into two broad classes, sin- tered (or cast), on the one hand, and bonded, on the other. Sintered magnets are formed by firing magnetic materials (e.g., aluminum, nickel and iron) at high temperatures into a single coherent body. Sintered magnets have high magnetic energy but tend to be hard, brittle, and thus extremely difficult to work or machine. Bonded magnets were first developed in the 1930’s by mixing small particles of magnetic material with a binder material such as plastic or rubber. The resulting magnet could be easily worked and machined. By 1954 bonded magnets were commer- cially available, but their magnetic energy was low. While bonded magnets were being developed, a group of scientists with the Philips Company were studying the qualities of a newly-discovered class of hard magnetic ma- terials composed of an iron oxide sintered with barium, strontium or lead. In the early 1950’s members of the Philips group secured a patent (the 778 patent) and pub- lished an article (the Philips article) describing a process in which this sintered material (hereinafter “barium fer- rite”) would be ground to fine particles, many as small as 1. The district court’s opinion is reported at 533 F.Supp. 493. A3 a single crystal. These particles would be placed in a mobile condition in a non-magnetic binder and subjected to a magnetic field which would orient the particles in sub- stantially the same direction. The particles would be fur- ther oriented when they were again sintered into a coher- ent, dense body with exceptionally high magnetic energy. Blume was aware of both existing bonded magnet technology and the then-recent research on the qualities of barium ferrite. During the mid-1950’s he engaged in re- search which led to the development of a high-enery bonded magnet. In 1958 Blume filed a patent application which became the 275 patent when issued in 1961. This patent covered a process for mixing plate-like particles of barium ferrite with a non-magnetic binder, and orienting the magnetic particles by means of mechanical forces ex- erted on the material by rolling or extruding processes. Orientation of the plate-like particles produced a magnet with twice the magnetic energy of earlier bonded magnets. Although it was well known in the art to orient particles in a non-magnetic matrix by exposing the material to a magnetic field, the mechanical orientation taught by the 275 patent process proved to be the first commercially practicable method of orienting the particles. The high energy bonded magnet created by the 275 process became a great commercial success. In an attempt to secure a patent which covered the product produced by the 275 process, Blume in 1962 added claims 8-10 to an existing patent application, which became the 675 patent when issued in 1966.2 These claims provide as follows: 2. The original patent application was filed in 1954. Claims 1-7 described a sound-reproducing device and are not in issue here. The term “675 patent” will hereafter refer solely to claims 8-10 of that patent. A4 I claim: 8. A permanent magnet material comprising a dis- persion of particles of a permanent magnet material in a non-magnetic matrix, a substantial portion of said particles having two substantially parallel opposed faces the distance between which is no greater than the dimension across said faces. 9. A permanent magnet material comprising a dis- persion of small bodies of a permanent magnet material in a non-magnetic binder, said particles being in the form of right cylinders and having a length to width ratio of no more than about one. 10. A permanent magnet material comprising a dis- persion of small discs of permanent magnet material in a non-magnetic molded binder, said discs having op- posite faces lying in parallel planes and having a thick- ness no greater than the width of said faces. These claims included within their description the plate- like particles of barium ferrite which, when oriented by tine 275 process, produced a high-energy bonded magnet. How- ever, the 675 patent product is not limited to the use of barium ferrite material, but rather encompasses any magne- tic material which could be given the specified shape. Furthermore, although the advantages of orientation are discussed in the file wrapper, the 675 product claims are not limited to oriented particles of the specified shape. The file wrapper indicates that even unoriented particles of the specified shape will produce a better bonded magnet than would particles of random shape. A specific method for obtaining particles of the requisite shape does not form part of the claimed invention. Thus the scope of the 675 patent includes, but is broader than, the product of the 275 patent process. A5 3M subsequently acquired the rights in the two patents and entered into the noncompete agreement with Blume. The agreement provided that Blume would work for 3M for one year and would refrain from any participation in the magnet business for a five-year period beginning on the day Blume was last employed by 3M. Since Blume’s last day of employment with 3M was on September 30, 1968, the noncompete agreement was due to expire on September 30, 1973. In May 1971 Blume and 3M provisionally agreed to a modification of the noncompete agreement which would have allowed Blume to enter the sintered magnet business in exchange for an extension of the noncompete agreement in the bonded magnet business to May 1, 1976.5 Blume, however decided not to enter the sintered magnet business, and therefore the May 1971 modification never took effect. Blume then sought permission to reenter the bonded magnet business. After much discussion and correspon- dence, which the district court’s opinion relates in full detail, 3M sent a letter-amendment dated June 26, 1972. This letter recited the noncompete agreement, released Blume to make sintered magnets and test equipment, and in the crucial clause, provided as follows: This letter, which is a substitute for the letter of May 3, 1971, shall serve to release you to >. ss #8 B. Establish or acquire facilities for making and/or selling Matrix-bonded Permanent Magnets, with the 3. The proposed modification also permitted Blume to engage in research in the bonded magnet field provided Blume granted 3M a royalty-free license in any bonded magnet Blume might acquire prior to May 1, 1976. Blume was further permitted to make and sell magnet test equipment. 4. 533 F.Supp. at 505-11. A6 express understanding that in making such Matrix- bonded Permanent Magnets you will not, prior to May 1, 1976 infringe any unexpired patent in your name which 3M obtained with its purchase of the Magnetic Division of Leyman Corporation, especially your U.S. Patent No. 2,999,275. Blume agreed to the proposed amendment on July 5, 1972. He subsequently formed the Electrodyne Company and con- tracted for construction of a manufacturing facility. By June of 1975 Blume had begun to manufacture high-energy bonded magnets by a “trade secret process” which Blume contended did not infringe the 275 patent process. On February 6, 1976, 3M filed its complaint, which charged Blume with infringement of both the 275 and 675 patents, and breach of the amended noncompete agreement. Blume denied infringement and breach of contract and alleged affirmative defenses based on contractual and es- toppel grounds. Blume asserted that the June 1972 letter- amendment immediately released him to make high-energy bonded magnets provided only that he not employ the 275 patent process prior to May 1, 1976. After that date, Blume contended, the letter-amendment granted him a li- cense to practice the 275 patent.® On Blume’s motion, the district court bifurcated the trial and first tried the issues raised by Blume’s affirma- tive defenses, The district court concluded that 3M was not estopped from bringing suit and that the amended noncompete agreement neither immediately released Blume to make high-energy bonded magnets nor granted Blume a license to practice the 275 patent after May 1, 1976, and Blume appealed. 5. The 275 patent had an expiration date of September 12, = The 675 patent had an expiration date of February 15, AT Following the second portion of the bifurcated trial, the district court held that Blume’s trade secret process infringed the 275 patent and thereby breached the amended noncompete agreement. Blume appeals from this holding. The district court further held that the 675 patent was invalid as obvious and therefore was not infringed, a hold- ing which 3M appeals. All three appeals were consolidated and are now before this Court. The Contract Issues The district court held that the noncompete agreement, as amended by letter of June 26, 1972, neither immediately released Blume from the 675 patent nor granted Blume a license to practice 3M patents after May 1, 1976, the date the noncompete agreement expired. Blume now protests that the bifurcation of the trial, which Blume requested, in retrospect served only to obscure the issues. He there- fore seeks on appeal “to present at one time the whole story” by means of a sixty-page appellate brief, which devotes 49 pages to a highly argumentative “Statement of the Case.” The arguments which Blume addresses to this Court evidence a misapprehension of our role. Fact-finding is entrusted to the district court, and its findings are reversi- ble only for clear error. Fed.R.Civ.P. 52. This Court is not to reconsider the whole evidence de novo, and this is all the more true where, as here, the district court’s find- ings depend upon assessments of credibility. United States v. Aluminum Co. of America, 148 F.2d 416, 433 (2d Cir. 1945). The district court determined, and we agree, that the disputed contract clauses were ambiguous. The court A8& therefore allowed both parties to submit an abundance of parol evidence to aid in the construction of the agreement. This evidence, which included both testimony by the parties and written materials, is analyzed in careful de- tail in the district court’s opinion.’ We have reviewed the evidence and the arguments of Blume and conclude that the district court’s ultimate determination regarding the intent of the parties and the meaning of the noncompete agreement was not clearly erroneous. Hil. Infringement of the 275 Patent Blume contends that from June 1975 to September 1976, and from June 1978 to September 1978, he practiced a trade secret process (TSP) which produced a high-energy bonded magnet without infringement of the 275 patent process. Unlike the 275 patent process, which mixes un- oriented magnetic particles with a binder and then orients the particles by means of rolling or extrusion, the TSP al- legedly achieves the necessary orientation of particles dur- ing the mixing step, through use of a specially modified Banbury mixer. The district court rejected this allega- tion, holding that the TSP was the equivalent of the 275 patent process, Graver Tank & Mfg. Co. v. Linde Air Prod- ucts, 339 U.S. 605, 609 (1950), and therefore infringed that patent.’ Blume contends that this determination must be va- cated and the issue remanded because the district court 6. 533 F.Supp. at 511-17. 7. The doctrine of equivalence is grounded upon the motion that if two devices perform the same task in substantially identical manners and obtain substantially identical results, they are the same or equivalent “even though they differ in name, form or shape.” Graver Tank & Mfg. Co., supra at 608. A9 failed to review a deposition by Walter Blume given under protective order and filed by 3M with the district court in camera immediately before the second trial. Blume asserts that had the district court reviewed this deposition the nature of the modifications to the Banbury mixer would have been made clear and the district court would have reached a contrary conclusion on the issue of infringement. Blume concedes that the deposition he now contends the district court should have reviewed was never offered into evidence. Since the deposition was never offered into evidence, the district court was not required to re- view it.” Rommel-McFerran Co. v. Local Union No, 369, 361 F.2d 658, 662 (6th Cir. 1966); see Processteel v. Mosley Machinery, 421 F.2d 1074, 1076 (6th Cir. 1970). A finding of equivalence is a determination of fact made after con- sideration of the patent, the prior art, and the particular circumstances of the case. Graver Tank & Mfg. Co., supra at 609. On the evidence properly before it, the district court’s determination of equivalence was not clearly er- roneous. 8. Blume states that at the second portion of the bifurcated trial, Dr. Hennig, a witness for the defendants, started to ex- plain the nature of the modifications to the small Banbury, but was stopped by Blume’s counsel with the statement, “don’t de- scribe the modification because that has already been described in camera in the record.” Later, Blume’s counsel remarked to the district court during Blume’s cross-examination that “while {information regarding the TSP] has been submitted to you in camera it has never been in the testimony itself.” These re- marks by Blume’s counsel, however, did not serve to introduce the deposition into evidence. We further note that after both parties had closed their cases, Blume’s counsel handed the trial judge five pages of the in camera deposition with the remark, “I would like for the Court to have them at your ready reference . . » 80 that you don’t have to go to the entire record to get it. You have enough papers, it seems to us, as it is.” This remark undercuts any argument that Blume was justified in treating _ entire in camera deposition as if it were admitted into evi- ence. Al0 IV. Invalidity of the 675 Patent There are three essential elements of patent validity: novelty, utility and nonobviousness. 35 U.S.C. §§ 101-103. 35 U.S.C. § 103 provides: § 103. Conditions for patentability; nonobvious sub- ject matter. A patent may not be obtained though the invention is not identically disclosed or described as set forth in section 102 of this title, if the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains. The purpose of this section is to distinguish true invention from a mere change of detail which may produce novelty but is not reflective of invention. See Frantz Mfg. Co. v. Phenix Mfg. Co., 457 F.2d 413, 327 (8th Cir. 1972). An examination of the subject matter sought to be patented re- quires a consideration of the scope and content of the prior art, the differences between the prior art and the claims at issue, and the level of ordinary skill. Sakraida v. Ag Pro, Inc., 425 U.S. 273, 280 (1976). The district court held the 675 patent invalid for ob- viousness in light of the prior art embodied by the 778 patent and the Philips article.’ The 675 patent, the district court noted, spoke of a dispersion of “particles”, “small bodies” or “small discs’ of a permanent magnet material in a non-magnetic binder. These particles, furthermore, 9. 533 F.Supp. at 525-39. All were of a specified shape, namely “discs” or “right cylin- ders” having opposite faces lying in parallel planes and having a thickness no greater than the width of the faces. Since a dispersion of magnetic particles in a non-magnetic binder was well known in the art, the district court deter- mined that the sole patentable invention, if any, disclosed by the 675 patent concerned the particular shape of the magnetic particles. The 778 patent, however, had previ- ously described a process whereby barium ferrite was reduced to small particle size, many of the particles being in the form of single crystals. And the Philips article had described these particles as plate-like, with preferential crystal growth along the basal planes so that the large dimensions of the crystal were in the basal planes and the small dimensions were normal to them. These dis- closures, the district court concluded, were virtually ident- ical to the description of particle shape in the 675 patent. Since both bonded magnet technology in general and the shape of these particles were revealed by prior art, the district court held that the 675 patent would be obvious to one of ordinary skill in the prior pertinent art. 3M contends that the 778 patent and the Philips article did not disclose discrete plate-like particles; it insists that the particles were spherical until fused together into the final sintered product. However, three expert witnesses, whom the district court found credible, testified ‘hat the Philips article disclosed individual or discrete particles which, although they grew larger and became more or- iented during the final sintering, were plate-like from the start. Under § 103, the scope and content of the prior art is a factual matter to be determined by the district court. Graham v. John Deere Co., 383 U.S. 1, 17 (1966). Where, as here, the district court chooses to credit the testimony of three expert witnesses as to what the prior art dis- Al2 closes, we cannot say the finding of the district court was clearly erroneous. Fed.R.Civ.P. 52. Accord, Norfin, Inc. v. IBM Corp., 625 F.2d 357, 364 (10th Cir. 1980). 3M next contends that the 778 patent and the Philips publication are deficient as prior art because they lack a disclosure enabling one skilled in the art to make the dis- crete plate-like magnetic particles, citing Seymour v. Os- borne, 78 U.S. (11 Wall.) 516, 555 (1870). Assuming, with- out deciding,’® that the enabling disclosure doctrine is ap- 10. After concluding that the prior art did contain an enabling disclosure, the district court suggested that proof of an enabling disclosure is unnecessary to invalidate a patent on grounds of obviousness, despite dictum to the contrary in Appli- cation of Collins, 462 F.2d 538, 542 (CCPA 1972). This Court has heretofore applied the enabling disclosure doctrine only in cases involving the defense of anticipation under 35 U.S.C. § 102. E.g., Tee-Pak, Inc. v. St. Regis Paper Co., 491 F.2d 1193 (6th Cir. 1974). The district court reasoned as follows: Where we are testing novelty [anticipation] under 35 U.S.C. § 102(b) we look to the prior art for the purpose of showing the invention was already known. The law requires that the whole invention be found in a single reference... . We see the enabling disclosure requirement .. . as a device for assuring that the invention in fact is to be found in the prior art... . But the same reasoning is not applicable where it is obviousness under 35 U.S.C. § 103, not novelty, which is being tested. Then prior art is resorted to, not to show that the very invention sought to be patented is already known, but . . . to see whether as a matter of fact the in- vention would be obvious to one skilled in the art from what is actually disclosed in the references. It would be artificia) and simply out of place in such a test to impose a requirement on the prior art reference or references that each contain an enabling disclosure. Minnesota Mining and Mfg. Co. v. Blume, No. C-1-76-51 (S.D. Ohio March 25, 1980) (supplementary order) (emphasis in orig- inal). 3M replies that: Since the defense of obviousness implicitly concedes the prior art to be further removed from the invention under consideration than where the defense is one of anticipation, the sufficiency of a prior art teaching should, if anything, be tested by a stricter rather than a lesser standard. (Continued on following page) Al3 plicable in this context, we find that the prior art contained an adequate disclosure. The district court heard testimony from four expert witnesses to the effect that the 778 patent and the Philips article taught that plate-like particles of barium ferrite could be produced by sintering barium car- bonate and iron oxide, then grinding and milling the re- sulting barium ferrite down to a specified size. Again, the district court’s decision to credit these expert witnesses and Footnote continued— We are inclined to support the district court’s view and find 3M’s criticism to be misplaced. The question is not whether a strict or liberal standard is to be applied to the sufficiency of a prior art teaching. The standard is quite simply whether the prior art, taken as a whole makes obvious the invention under consideration. Sakaida v. Ag Pro, Inc., supra. The enabling disclosure concept is a commonsense factor in making a determi- nation of obviousness, for if neither any item of prior art, nor the background knowledge of one with ordinary skill in the art, would enable one to arrive at an invention, that invention would not be obvious. But to argue, as does 3M, that the sufficiency of each prior art teaching must be tested under a strict standard requiring an enabling disclosure is to shift the emphasis from obviousness in light of the prior art, taken as a whole, to the sufficiency of each prior art teaching separately considered. The cases cited by 3M in which the enabling disclosure doc- trine has been applied to the “obviousness” defense under § 103 all involve chemical compounds. Ortho Pharmaceutical Corp. v. American Hospital Supply, 534 F.2d 89, 92-93 (7th Cir. 1976); Application of Hoeksema, 399 F.2d 269 (CCPA 1968); Applica- tion of Brown, 329 F.2d 1006 (CCPA 1964). In the context of chemical compounds it seems fair to require that a prior art reference to such a compound be more than a mere concept since a properly programmed computer could generate numerous theoretical formulations. But even in these cases, the claimed invention will be found obvious if the compound has been de- scribed in prior art, and an enabling disclosure is contained in the prior art or a process for preparing them “would be obvious to those of ordinary skill in the art.” Application of Hoeksema, 399 F.2d at 272. Thus there is no requirement that the prior art must make an enabling disclosure before it may be considered in determining obviousness, rather, the requirement is simply that the means which would enable the inventor to arrive at the product be obvious. However, we hesitate to announce a legal rule in this area when it is clear that here an enabling disclosure was made by the 778 patent. Thus, we reserve decision on this question, which has been addressed in only tangential fashion by the parties. Al4 to find as a matter of fact that the prior art contained a sufficient enabling disclosure is not clearly erroneous. 3M characterizes the testimony of these expert wit- nesses as “naked opinion evidence” and contends that it submitted “scientific fact evidence” to the contrary which must prevail as a matter of law, citing Lovas v. General Motors, 212 F.2d 805, 808 (6th Cir. 1954). But Lovas, which held that testimonial evidence “positively contra- dicted by the physical facts” lacks probative value, is in- applicable here. The “scientific fact evidence” introduced by 3M was a test performed in 3M facilities by 3M em- ployees, without notice to Blume, which purported to show that when one skilled in the art follows the teaching of the 778 patent, most of the resulting particles of barium fer- rite are not plate-like. In response to 3M’s post-trial motion under Fed.R.Civ.P. 52(b) for amendment of findings and judgment, the district court specifically declined to give the test conclusive weight: We reject 3M’s contentions that its [test results] testi- mony requires that the Court amend its findings and conclusions. In connection with what 3M says about the failure of its test for trial to produce plate-like particles by following the teachings of the Philips prior art, it is noteworthy that in that test at least some of the particles produced were plate-like. Also, there was no indication of the amounts of ingredients used i:: 3M’s test for trial .... Defendants argue the total amount is critical for the success of the process and to change the total amount of ingredients, even though the proper proportions are maintained, will require an entirely different process if the same end product is to be ob- tained.” 11. Minnesota Mining and Mfg. Co. v. Blume, No. C-1-76-51 (S.D. Ohio March 25, 1980) (supplementary order). Al5 As noted by In Re Michalek, 162 F.2d 229, 232 (CCPA 1947), “it is not a difficult matter to carry out a process in such fashion that it will not be successful and, therefore, the failures of experimenters who have no interest in suc- ceeding, should not be accorded great weight.” An ex- periment by an interested party which shows that it may be possible to operate within the disclosure of a prior art patent without obtaining the disclosed product does not overcome the presumption that the process, if followed by one skilled in the art, will produce the product. Appli- cation of Weber, 405 F.2d 1403, 1407 (CCPA 1969). Thus the testimony of the four expert witnesses was not, by means of 3M’s test, “positively contradicted by the physical facts,” and the district court’s determination to credit the expert witnesses reflects neither a mistake of law nor a clearly erroneous view of the facts. For the reasons stated above, the judgment of the dis- trict court is AFFIRMED. Al6 OPINION OF DISTRICT COURT VACATING TEMPORARY RESTRAINING ORDER (Dated September 2, 1976) Civil Action No. C-1-76-51 IN THE UNITED STATES DISTRICT COURT For THE SOUTHERN DISTRICT OF OHIO WESTERN DIvISION MINNESOTA MINING AND MANUFACTURING COMPANY, Plaintiff, VS. WALTER S. BLUME and THE ELECTRODYNE COMPANY, INC., Defendants. [p. 1] OPINION Porter, J.: This case is before the Court on plaintiff's motion for issuance of an order to show cause and for a contempt judgment against defendants (doc. 18), and defendants’ motion for relief (doc. 22) from a temporary restraining order issued by this Court on February 17, 1976 (doc. 8). Defendants have filed a memorandum contra plaintiff's motion for a show cause order and contempt judgment (doc. 22). Plaintiff has filed a response to defendants’ motion seeking dissolution of the temporary restraining order (doc. 26), to which defendants have replied (doc. 28). Al7 The suit involves two causes of action, one for patent infringement and one for unfair competition which encom- passes charges of patent infringement. According to plain- tiff (doc. 2), during the 1950s defendant Blume developed a flexible magnet which had the advantageous property of being made of a pliable material and yet having greater holding force than prior flexible magnets. Patents were issued on the new magnet (Patent No. ’675) and on the process of making it (Patent No. ’275) on February 15, 1966, and September 12, 1961, respectively, (doc. 4, ex. Bl and B2). To commercialize the Blume development, the Leyman Corporation of Cincinnati, Ohio, established a magnetic division, with Mr. Blume as general manager. Subsequently, plaintiff acquired the magnetic division of Leyman Corporation, including the patents whose infringe- ment is presently disputed, from Blue [p. 2] and Leyman, paying Leyman $1,700,000 and Blume $566,800. At the same time, Blume entered into an employment contract with plaintiff (attached to doc. 13). In part the present dispute involves portions of this contract and the extent to which it restricts Blume from infringing patents ’275 and ’675. Plaintiff, in its complaint filed February 6, 1976 (doc. 1), asserts that defendant Blume, doing business as The Electrodyne Company, makes and sells flexible magnets which infringe the patents acquired from Blume and Ley- man Corporation. Plaintiff contends that Blume’s actions both infringe its patents and violate restrictions in Blume’s employment contract. Simultaneously with the filing of its complaint, plaintiff filed a motion for a temporary re- straining order (doc. 2) against Blume. At the time, de- fendants Blume and Electrodyne responded only with an affidavit and a few attached documents (doc. 7). Since Blume was convalescing from major surgery, they were unable at the time to file an answer. Al8 Based on the information then before it, this Court on Fekruary 17, 1976, granted plaintiff's motion for tem- porary restraining order enjoining defendants: “until further order of the Court from making, using, selling or offering for sale flexible magnets, exempli- fied by Electrodyne ‘Plastalloy’ Permanent Magnets offer for sale to Beach Manufacturing Corporation, 15602 Container Lane, Huntington Beach, California, in infringement of United States Letters Patent No. 3.235,675 issued to Leyman Corporation on February 15, 1966, upon the application of Walter S. Blume, said patent having been assigned by Leyman Corpora- tion to plaintiff Minnesota Mining and Manufacturing Company by document dated October 2, 1967.” Plaintiff now asserts that defendants, since February 17, 1976, have continued to sell flexible magnets which in- fringe the ’675 patent and are virtually indistinguishable from the magnets defendants sold to Beach Manufacturing prior to [p. 3] issuance of the temporary restraining order. Plaintiff contends that defendants therefore are in con- tempt of the order. Defendants, in their reply, assert several arguments. In their first argument, as we understand it, they claim that plaintiff has exhibited little confidence in patent 675, and should be estopped to claim infringement of a patent whose validity plaintiff itself has questioned. Second, we understand defendants to claim that in July, 1975, when they received some indication of plaintiff's view that they might be infringing, they sent some samples of their prod- uct to plaintiff. Plaintiff at that time did not inspect these samples, and defendants assert that this is evidence sup- porting some sort of estoppel theory against plaintiff. Third, we understand defendants to assert as additional Alg evidence supporting an estoppel theory against plaintiff their reliance on statements made by plaintiff's counsel at the February 13, 1976, hearing on whether or not to issue the temporary restraining order. At that hearing defen- dants had mentioned their submission of samples of their products to plaintiff in July, 1975 as an example of their good faith (doc. 14, p. 38). Plaintiff responded that its refusal to inspect the samples was reasonable since the samples submitted to it were considerably different in character from the magnets sold to Beach Manufacturing which plaintiff claimed infringed the patents (doc. 14, p. 39). Defendants now claim that the magnets they have manufactured and sold since the issuance of the restraining order were identical to the samples which they sent to plaintiff in July, 1975 and which plaintiff said at the February, 1976 hearing were substantially different from the infringing magnets. Defendants’ further argument is that, contrary to plaintiff's contentions, the magnets de- fendants have sold since issuance of the temporary re- straining order are not “exemplified,” to use the language of the order by the magnets sold to Beach. [p. 4] It seems the magnets sold to Beach contained natural rubber, while the magnets sold subsequent to the restraining order contained instead a substance called “buna-n.” Defendants maintained that this difference in composition made the magnets not interchangeable. As evidence they cite the fact that the latter type of magnets failed to satisfy specifi- cations in some customers’ orders which required the former type. To violate the restraining order, the magnets in ques- tion would have to be made, used, sold, or offered “in infringement of” the ’675 patent and “exemplified” by the magnets sold to Beach Manufacturing. The parties appear to dispute both whether the magnets defendants manu- A20 factured and sold subsequent to the restraining order in- fringed the patent and whether they are exemplified by the magnets sold to Beach. Even if we were to attempt to resolve the latter question at this point on the basis of affidavits only, the former question goes to the heart of the merits of the case, i.e., which magnets manufactured by defendants, if any, infringed the patent. We do not consider it appropriate to resolve the important infringe- ment question on the basis of affidavits only. Furthermore, the defendants’ first three arguments, apparently based on an estoppel theory, need not be reached unless it is first determined that the defendants did infringe the patents. For these reasons, we conclude that it is advisable to re- serve judgment on the contempt question until the merits of the case have been tried. Turning to defendants’ request that the restraining or- der be lifted, plaintiff submits that defendants have in- creased their staff from two men to twelve, and that their sales now total $146,000, as opposed to $10,000 in six months as defendants portrayed at the hearing on issuance of the restraining order (doc. 14, p. 15). Plaintiff also gen- erally reasserts the contentions it asserted in favor of initial issuance [p. 5] of the restraining order, and it refutes defendants’ claims that they are not in contempt. De- fetidants contend that plaintiff’s probability of success on tie merits of the case is not clear, and that the irreparable injury to them and their business caused by the restrain- ing order clearly shows that the equities favor a lifting of the order. As stated in Blount v. Societe Anonyme, 53 F. 98 (1892), the granting of preliminary injunctions in patent infringement suits in this Circuit depends on the proba- bility that the party seeking the order presents a valid title to the patent, that the patent is valid, and that the defen- A21 dant has infringed. The appropriateness of any prelim- inary injunction depends on the probability that the party seeking the injunction will succeed on the merits and that he will suffer irreparable injury, that the potential harm to him outweighs the harm to defendant, and that an in- junction will serve the public interest. Burkett v. Tuslaw Local School Dist. Bd. of Educ., 380 F.Supp. 812 (N.D. Ohio 1974). See also, American Federation of Musicians v. Stein, 213 F.2d 679 (6 Cir.), cert. den. 348 U.S. 873 (1954). At the time this Court granted the plaintiff's motion for a temporary restraining order, it had before it plaintiff's memorandum and exhibits. As noted above, defendants, due to Mr. Blume’s illness, had filed only an affidavit. On the basis of this information there seemed little question of the validity of the patents in question or of plaintiff's title to them. The Court took note of the fact that regard- less of its disposition of plaintiff's motion, it appeared that one of the parties would suffer substantial injury. Based on the information before it, what was most persuasive to the Court was the apparent strength of plaintiff’s case on the merits. [p. 6] Since the issuance of the temporary restraining order defendants have filed their answer to plaintiff's al- legations (doc. 13) and have asserted a counterclaim based on their alleged right under Blume’s employment contract with plaintiff to infringe the patents plaintiff had ac- quired at any time and certainly after May 1, 1976. Like plaintiff, defendants by now have also filed several memo- randa and voluminous exhibits. Without expressing any opinion, of course, as to the merits of plaintiff’s ciaims or defendants’ counterclaims, we cannot now say that the case is a clear one. A22 “A preliminary injunction will not be granted when defendant is responsible and a substantial doubt of infringe- ment exists,” Walker on Patents, § 686, at 415 (Deller 1973). In Eli Lilly & Co. v. Generix Drug Sales, Inc., 460 F.2d 1096 (5 Cir., 1972), the Court observed that “the burden is ordi- narily on the party seeking preliminary injunction pro- tection in an infringement suit to demonstrate beyond question that the patent he sues on is valid and infringed, as well as showing that other equitable grounds are pres- ent,” although the rule is ameliorated when the patent has long been acquiesced in or has been adjudicated to be valid. Even if the patents in the instant case are of the type which trigger amelioration of the ordinary rules, in view of the development of this case we no longer consider that the temporary restraining order is clearly appropriate. Whether to grant relief from a prior judgment is a mat- ter of discretion with the Court. 11 Wright & Miller, Fed- eral Practice & Procedure § 2857. After careful considera- tion we conclude that justice is best served in this case by granting defendants’ motion for relief from the temporary restraining order. A23 ORDER OF DISTRICT COURT ON BIFURCATED TRIAL (Dated June 1, 1978) Civil Action No, C-1-76-51 IN THE UNITED STATES DISTRICT COURT For tHe SouTHERN District or OnI0 WESTERN DIVvISION MINNESOTA MINING AND MANUFACTURING COMPANY, Plaintiff, Vs. WALTER S. BLUME and THE ELECTRODYNE COMPANY, INC., Defendants, ORDER This case, which involves patent infringement in the field of magnets and magnetism, was tried before the Court on August 29-September 2, 1977 on the bifurcated affirma- tive defenses of license and estoppel raised by the De- fendants. For the reasons stated in an Opinion filed simul- taneously with this Order, the Court finds in favor of the Plaintiff on the affirmative defenses and they are there- fore rejected as being without merit. The matter is con- tinued for a trial of the main infringement action of the Plaintiff against the Defendants. SO ORDERED, Davin S. Porter Chief Judge, United States District Court A24 FINDINGS AND CONCLUSIONS OF LAW OF DISTRICT COURT ON BIFURCATED TRIAL (Dated June 1, 1978) 533 F, Supp. 493 Civil Action No, C-1-76-51 IN THE UNITED STATES DISTRICT COURT For THe SoutHern District or Onto WESTERN DIVISION MINNESOTA MINING AND MANUFACTURING COMPANY, Plaintiff, vs. WALTER S. BLUME and THE ELECTRODYNE COMPANY, INC.,, Defendants, {p. 1] FINDINGS OF FACT AND CONCLUSIONS OF LAW Porter, C. J.: This case, which involves patent infringement in the field of magnets and magnetism, demonstrates two note- worthy points. The first is the important role played by magnets and magnetism in our economy. By one estimate magnets, and magnetism have an economic impact in our economy equivalent to almost 1-1/2% of the Gross National Product dx 380; Jacobs, The Role of Magnetism in Tech- nology 1, 5 (General Electric Research & Development Center (November 1963)). As Jacobs points out, the basic principles of magnetism, as applied to the vital areas of elec- tric power, communications, and information storage, “per- meate our whole modern society.” Id. The second note- A25 worthy point which this case demonstrates is one we are told John Stuart Mill emphasized over a hundred years ago—the importance of “having the meaning of a word clearly understood before using it, and the meaning of a proposition [p. 1A] [clearly understood] before assenting to it.” Inaugural Address as Rector, University of St. Andrews (February 1, 1867). This latter aspect of the case will hopefully become clear to the reader as this opinion progresses. The plaintiff in this case, Minnesota Mining and Manu- facturing Company (3M Co.), charges patent infringement on the part of the defendants, Walter S. Blume and The Electrodyne Company, with respect to two patents, U.S. Patent No, 3,235,675 (hereinafter the “675” patent) and U.S. Patent No, 2,999,275 (hereinafter the “275” patent).' The 275 and 675 patents are, respectively, the process and the product patents for a magnet currently produced by 3M under the name “Plastiform.” Both the 275 and 675 patents were originally issued to Blume as patentee, and subsequently assigned by him to his employer at the time, Leyman Corporation, subject to a right to receive royal- ties. By an agreement [p. 2] of September 30, 1967, Ley- man Corporation sold all its rights and interest in these patents (subject to Blume’s royalty rights) to 3M, in pres- ent plaintiff, as part of the sale of the Leyman Magnetics Division to 3M (jx 1). At approximately the same time, 3M signed two agreements with defendant Blume (jx II, III). One of these was an agreement concerning Blume’s roy- alty rights under his patents which included a commuta- tion of royalty payments (jx II). The other was an employment agreement for one year which included a There is another patent involved in this case, U. S, Patent No. 3; 359, 152, which is hereinafter referred to as the "152" patent. This tent, like the 275 and 675 patents, was also originally iss to Blume (tr. 60), A26 five-year noncompete agreement, effective upon termina- tion of Blume’s employment, restraining Blume from en- tering the broad field of magnetics (jx III). Blume ceased employment on October 1, 1968, and thus, by its own terms, the noncompete agreement would have expired on Octo- ber 1, 1973, had not the parties executed two letter-amend- ments to the original agreement on May 3, 1971, and June 26, 1972 (jx IV, VIII). The main dispute between the parties concerns the meaning and effect of these two amendments, particularly the latter. In their answer, the defendants deny infringing the 675 and 275 patents held by the plaintiff and assert the affir- mative defenses of license and estoppel. The license de- fense is based primarily on the defendants’ interpretation of the 1971 and 1972 letter amendments to the 1967 em- ployment agreement. The estoppel defense is primarily based upon various actions taken by 3M (or, rather, in- action on its part) with respect to the possible infringement of the 275 and 675 Blume patents by Polymag, Inc., a manu- facturer located in Sag Harbor, New York, producing mag- nets similar to to that produced under the 275 and 675 patents, under its own patent, the Peccerill patent, U.S. Patent No. 3,312,763 (hereinafter the “763” patent). On motion by the defendants, [p. 3] this Court bifurcated the issues raised by these affirmative defenses for trial prior to the issue of infringement, The parties then entered into a joint stipulation of issues for purposes of trial which is as follows: A. It is agreed that since the entry of the Court's order on September 2, 1976, the defendants have con- tinuously practiced the 275 method in the manufacture of the product sold by the defendants under the trade name “Plastalloy”. A27 B. The issues raised by defendants and controverted by plaintiff are as follows: 1, The defendants assert that since June 26, 1972 they have been released to make and sell “Matrix-Bonded per- manent magnets,” as that term is defined in the 3M letter to Blume of June 26, 1972, and which at all times since ap- proximately July or August 1975 have been sold by de- fendants under the trade name “Plastalloy.” 2. The defendants assert that they have the right to practice the 275 method and to make, use and sell the product produced thereby and to practice any other patents acquired by 3M from Leyman, specifically including the 675 patent, for the following reasons: (a.) that the letter from 3M to Blume dated June 26, 1972 (amending the October 1, 1967 agreement between 3M and Blume, as amended by 3M letter to Blume of May 3, 1971) immediately released Blume to make ‘“Matrix- Bonded permanent magnets,” as defined in the letter agree- ment of June 26, 1972, free from claims of infringement of the 675 product patent and any other patent which 3M acquired from Leyman on September 30, 1967 except that prior to [p. 4] May 1, 1976 Blume could not use the 275 method patent in the production of the said “Matrix- Bonded permanent magnets.” (b.) that 3M is estopped from asserting any infringe- ment by the defendants of the patents it acquired from Leyman on September 30, 1967, and specifically including the patents in suit, namely 275 and 675, because of the position of 3M asserted in the letters dated May 3, 1971 and June 26, 1972 (amending the agreement dated October 1, 1967) together with the written and oral representations which defendant Blume claims were made directly to him and indirectly to him and others (including but without A28 limitations, the 3M-Polymag correspondence and the 3M correspondence with its German associates and the German Patent Office in connection with the German application corresponding to the U.S. 275 method) by authorized rep- resentatives of the plaintiff (including, but without limi- tations, those of Messrs. Granrud, Blankenbaker and West- bee) all of which occurred during the period from October 1, 1967 until the filing of the complaint on February 6, 1976 and all of which Blume asserts were relied upon by him prompting his purchase of property and commencement of business including the manufacture of “Plastalloy” with the full and complete knowledge of 3M. (c.) that the plaintiff is estopped from asserting any infringement by the defendants of the 275 or 675 patents because of the release provisions of the letter of June 26, 1972 by 3M to the defendant Blume. The trial of the bifurcated issues was held on August 29-September 2, 1977, with daily transcript copy, and the parties have submitted both post-trial briefs and proposed findings of fact and conclusions of law on the stipulated issues. Upon consideration of the issues, this Court makes the following findings of fact and conclusions of law; [p. 4A] The plaintiff, 3M Corp., is a Delaware corpora- tion and has its principal place of business at St. Paul, Minnesota. The individual defendant, Walter S. Blume, resides in Hamilton County, Ohio, within this District and is President of the corporate defendant, The Electrodyne Company, Inc. The defendant, The Electrodyne Company, Inc., is a corporation organized and existing under the laws of the State of Ohio, resides therein, and has a regular and established place of business in Clermont County, Ohio, within this District. The jurisdiction of this Court is invoked under Title 28 United States Code, § 2201, et seq., A29 (declaratory judgment action), § 1338(a) (patent infringe- ment), § 1332(b) (unfair competition), and § 1332(a) (diversity jurisdiction for the breach of contract claim). Venue in this District has not been objected to. On September 30, 1967, 3M Co. acquired the magnetics division of Leyman Corporation. At the time of the acqui- sition Walter Blume was an employee of Leyman and Vice- President in charge of the magnetics divisions (tr. 29). During his twenty-three years of employment with Ley- man, Blume had secured a number of patents, including the 275 and the 675 patents, all of which he assigned to Leyman and for which he received 2% of gross sales over $200,000 as royalty payments (tr. 30). Under the agree- ment between 3M and Leyman, Leyman conveyed all its right, title and interest in the Blume patents to 3M for $2,267,000 (jx I), of which Blume eventually [p. 5] re- ceived $566,800 under a separate 3M-Blume agreement providing for a commutation of royalty payments over a five-year period (jx II).? On the day following the Leyman acquisition, 3M Co. and Blume entered into a one-year employment agreement 2. During trial defendants contended as part of their estoppel claim that Leyman and Blume were induced to enter into these agreements by 3M’s representations that 3M was “highly patent conscious” and would strongly promote the magnetics business so that even if 3M’s offer as the initial payment was not as high as that of other companies bidding for the Leyman magnetics division, in the long run, Leyman and Blume would receive more money (tr. 48-50, 55, 475-6, 179-84). In fact, Mr. Blume ap- parently received only $4,300 over the minimum guaranteed royalty. Defendants contend that this action on the part of 3M is relevant to show both Mr. Blume’s reliance on 3M to vigorously prosecute his patents and as evidence with respect to 3M’s failure to sue Poly-Mag (tr. 49). This Court finds that any evidence of Mr. Blume’s reliance on any representations made by 3M prior to entering into the original set of agreements involved in the Leyrnan acquisition are irrelevant to the issues presented in this lawsuit. Even if this Court were to find this evidence relevant, we find that it is not probative as to any of the issues presented. A30 (jx III). This agreement included a broad noncompete agreement excluding Blume from any participation, direct or indirect, in the “(1) design, (2) development, (3) manufacture, or (4) sale of magnets or magnetic composi- tions including . . . the process of producing magnetic com- positions, the process and formula for incorporation of nonmagnetic binders with magnetic compositions, and ap- paratus for producing or testing magnets or magnetic compositions” (jx III, Article II). By the terms of the agreement, this noncompete covenant came into effect for a period of five years starting on the day Mr. Blume was last employed by 3M. Mr. Blume was employed by 3M from [p. 6] October 1, 1967, to September 30, 1968, and thus the noncompete covenant would have expired by its own terms on September 30, 1973 (tr. 55-56). Prior to this date, however, the parties twice amended this non- compete restrictive covenant. It is the operation and effect of these amendments on which the license defense pri- marily depends and to which we now turn. [p. 7] LICENSE ISSUE Prior to discussing the license issue, it may be helpful to discuss the background of Mr. Blume and the relations of the parties during the events at issue in this case. The record shows that Mr. Blume’s formal education was lim- ited to completion of eight years of grade school (tr. 41). Despite that fact, Mr. Blume has extensively educated himself on the topic of magnets and permanent magnetism. According to the 1967 3-M-Leyman agreement, eleven United States patents had been issued to Mr. Blume as original patentee, three additional United States patents 3. Defendants do not contend that this provision in Blume’s employment contract operated to release Blume to infringe his patents or as a license under his patents at the end of the five-year period (tr. 305). A31 were pending at that time, and twenty-nine foreign patents had been issued corresponding to the outstanding United States patents (jx I). In addition, Mr. Blume testified at trial that he has attended various national and in‘ national conferences on magnetism, corresponded with other experts in the field of permanent magnetism and, on prior occasions, had rendered expert written opinions for the plaintiff 3M on the ferromagnetic qualities of per- manent magnet materials (tr. 42-43). Clearly, Mr. Blume was an expert in the field of magnets and magneticm. whose technical expertise 3M wanted to harness for their own benefit (tr. 692; dx 188, 189; cf. dx 317). It also appears clear from the record that during the events in question Blume was on friendly terms with several of the representatives of the plaintiff. In partic- ular, defendant Blume and F. A. “Jim” Blankenbaker, head of 3M’s Dielectric Materials and Systems Division, [p. 8] appear to have developed a reasonably close, friendly relationship (tr. 215-17, 691-92). As Mr. Blankenbaker was apparently the source of the ideas which culminated in the two amendments to the original restrictive covenant (tr. 539), the Court feels that the relations between the parties are highly relevant in interpreting the contract documents. Upon completion of his one year of employment, Mr. Blume declined to continue working for 3M. Apparently Mr. Blume was not happy working in the corporate struc. ture of a large organization such as 3M (tr. 691). In any case, during the first few years following Blume’s employ- ment by 3M, Blume attempted to find some business venture in which he could become that which would not violate his restrictive covenant with 3M. The record re- flects that during this period Mr. Blume made numerous unsuccessful attempts to establish some business totally outside the field of magnetism (tr, 79-81, 221-23; dx 152- A32 154, 156-66). The record also reflects that during this period Mr. Blume was on several occasions offered con- sulting agreements with 3M in an effort to make use of his technical expertise (tr. 56-57, 62-64; dx 121, 125, 128, 184-85). However, even though Mr. Blume was appar- ently willing to act as a consultant on an informal basis (for which he was paid only his out-of-pocket expenses), he was unwilling to sign any formal contractual agree- ment for fear of reactivating the noncompete covenant in his original employment agreement for an additional five-year period (tr. 64-67; jx III, Article II). By the end of i970, the parties had reached a quandry—3M wanted to be able to “harness” Mr. Blume’s “technical horse- power” on a permanent basis to the benefit of their venture into the magnetics field, while Mr. Blume strenuously resisted their overtures [p. 9] for fear of limiting his future right to re-enter the broad field of magnetics unless he were offered “consideration commensurate with the gamble represented by the postponement” (dx 188, 189). Having paid over $2 million for the Blume patents and negotiated the noncompete covenant with Mr. Blume, 3M was apparently unwilling to do this. Thus, the parties were at loggerheads with Mr. Blume, an individual of proven technical expertise in the entire field of permanent magnetism, “dying on the vine,” in the words of one witness, as a result of the restrictive covenant (tr. 692). Due to their friendly relationship, Mr. Blume and Mr. Blankenbaker would occasionally meet for lunch or dinner whenever Mr. Blume was in St. Paul, Minnesota, or Mr. Blankenbaker was in Cincinnati (tr. 691). At one of these meetings in Cincinnati, on March 9, 1971, Mr. Blanken- baker informed Mr. Blume that the ceramic magnet plant of the John Oster Manufacturing Company, of Milwaukee, Wisconsin (which had produced brittle sintered magnets for internal use) was for sale (tr. 76-79, 693-94). During A33 this meeting Mr. Blankenbaker and Mr. Blume also dis- cussed the effect which Article II, the restrictive covenant in Blume’s 1967 employment contract with 3M, would have on Blume’s purchase of the Oster facility unless that con- tract were modified. Mr. Blume indicated that he was in- terested in getting into the sintered magnet business, if that could be arranged through an amendment modifying his noncompete agreement. Mr. Blankenbaker responded that it would be all right with 3M if Mr. Blume visited the Oster facility to see whether it would suit him. Mr. Blume visited the Oster facility on [p. i0] March 17, 1971, and subsequently wrote both Mr. Blankenbaker and Mr. Granrud‘ informing them of the details of the visit and reiterating his interest in acquiring the facility (tr. 78-79, 88-89, 693-95; dx 192-96). As a class, the hard and brittle cast or sintered mag- nets are appreciably different from flexible permanent magnets, which include the high-energy single product of the Leyman Company produced under the Blume patents at the time of the 1967 3M acquisition and now manufac- tured by 3M under the trade name “Plastiform” (tr. 76-77, 228-232; px 53-54). Prior to the arrangements concerning Mr. Blume’s visit to Oster, Mr. Blume and Mr. Blanken- baker had apparently discussed the prospects of Mr. Blume’s being able to develop a super flexible magnet which would have an energy level at least two and one- quarter times the energy level of the sole product of Leyman produced by 3M under the Blume patents (tr. 693).5 Such a development would be of tremendous com- 4. Mr. Granrud was, at the time of the events in question in this case, a partner in the firm of Kinney, Alexander, Sell, Steldt and Delahunt, patent counsel to 3M. 5. The energy level of this super-magnet would be approxi- mately 2.25 x 10° gauss-oersteds (jx IV). The energy level of the sole product of Leyman under the Blume patents was only about .9 x 10¢ gauss-oersteds (tr. 556). A34 mercial value to 3M if they could acquire it, since such a super-magnet would be stronger than any other flexible magnet presently on the market (tr. 692-93). On the other hand, perrnitting Mr. Blume to get into the cast or sintered magnet business would put him in a much better position to begin making flexible magnets after his restric- tive covenant expired on September 30, 1973 (tr. 114; jx IV). By the proper wording of an amendment to Blume’s 1967 restrictive covenant, however, an arrangement could be worked out which would apparently solve the parties’ prior dilemma—Mr. Blume would be freed to re-enter a portion of the [p. 11] magnet field (the cast or sintered magnet area) and to make and sell apparatus for testing magnets or magnetic compositions in exchange for an extension of a more narrowly drawn restrictive covenant and an agreement to freely share any new discoveries he might make. The May 3, 1971 letter-agreement, the first of two amendments to Blume’s 1967 noncompete agreement, was the result of this arrangement. This document is reproduced in the margin.° 6. Joint Exhibit IV reads as follows: Dear Mr. Blume: On September 30, 1967, Minnesota Mining and Manufacturing Company (“3M’’) purchased from the Leyman Corporation its Magnetics Division which you had created and were heading, including a number of patents in your name. Your single product was permanent magnets comprising anisotropic, substantially domain size particles of permanent magnet material which had been mechanically oriented and which were bonded together by a nonmagnetic matrix material. Such permanent magnets are hereinafter referred to as “Matrix-bonded Permanent Magnets” and are appreciably different from cast or sintered magnets such as the aluminum-nickel-cobalt alloys now sold as “Alnico” mag- nets. Since that date, 3M has continued the business of making and selling Matrix-bonded Permanent Magnets. Also on September 30, 1967, by a separate agreement with you 3M purchased your equity in the Magnetics Division of the Ley- man Corp., and by a written agreement dated October 1, 1967, you were employed by 3M for one vear Article II of that agreement (Continued on following page) A35 [p. 12] Admittedly the language of this document is not internally consistent. Also, it is clear that, strictly speaking, the provisions of this first letter-amendment never actually came into effect. By its own terms, the amendments contained in the May 3 letter were to take effect only “upon the establishing or acquiring” of a “facility for making and/or selling cast or sintered mag- nets... at any time prior to September 30, 1973” (tr. 115, 186-87; jx IV). Following his acceptance of the May 3 agreement, Mr. Blume investigated the sintered magnet business and, after [p. 13] contacting various acquaintances in that business, determined that the market was seriously Footnote continued— prevents you from participating in tiic manufacture or sale of any sort of magnet or magnetic composition until September 30, 1973, five years after your eznployment terminated. You now advise that you wish to acquire from the John Oster Manufacturing Company its facility for manufacturing sintered magnets. Of course, the aforementioned Article II was primarily intended to prevent you from making and/or selling Matrix-bonded Permanent Magnets, but your entry into the man- ufacture and sale of cast or sintered magnets at the present time would obviously put you into a better position to begin making flexible magnets after September 30, 1973. Accordingly, 3M is unwilling to modify the provisions of the aforementioned Article II except on certain conditions. This letter shall serve to release you to establish or acquire a whole or controlling interest in the John Oster facility or in some other facility for making and/or selling cast or sintered magnets, subject to the following conditions which shall take effect upon establishing or acquiring such a facility at any time prior to September 30, 1973. (p 12] I. Prior to May 1, 1976, you shall not individually, in association with others, as an employee of a third party, or through ownership and control of any corporation, or otherwise, participate in any way, directly or indirectly, in the (1) design, (2) development, (3) manufacture, or (4) sale of Matrix-bonded Permanent Magnets except as provided in paragraphs II and III below. II. If at any time prior to May 1, 1976, you or any company which you own or control should file or acquire a United States patent application having utility for Matrix-bonded Permanent (Continued on following page) A36 depressed (tr. 127-28). Thus, Mr. Blume decided against acquiring the Oster facility or engaging in the production of sintered magnets and the conditions contained in the May 3 letter never came into effect (tr. 127-28, 711-13). In light of the parties’ understanding that similar terms in both the May 3 letter-agreement and the later June 26, 1972, letter-agreement (which did come into effect) had the same meaning (see tr. 243-45, 301, 556-57), and the defendants’ contention that their license arises out of the language of both letter amendments (tr. 301-305), this Footnote continued— Magnets, you shall promptly furnish 3M with a copy; and when- ever a U. S. patent issues on any such patent application or on a division, continuation, or continuation-in-part of any such patent application, you shall offer to 3M a nonexclusive, royalty-free license for the life of any such patent to make, use and sell Ma- trix-bonded Permanent Magnets, and 3M shall release you to en- gage in the development of Matrix-bonded Permanent Magnets for this purpose. III. If the patent application mentioned in the preceding par- agraph II concerns an invention by which Matrix-bonded Perma- nent Magnets of an energy product of at least 2.25 x 10° gauss- oersteds can be produced, 3M shall grant to you for the immediate benefit of you or your heirs or any company which you own or control a nonexclusive, royalty-free license to make magnets hav- ing an energy product of at least 2.25 x 10° gauss-oersteds under and for the life of any of the patents 3M acquired from Leyman Corporation, and shall permit that company to immediately make, use and sell such Matrix-bonded Permanent Magnets. IV. You are released to make and sell apparatus for testing magnets or magnetic compositions. {p. 13] This letter is submitted to you in duplicate. If the terms and conditions as set out above are satisfactory to you, please sign both copies and then return one fully executed copy to us. MINNESOTA MINING AND MANUFACTURING COMPANY By /s/ Robert L. Westbee R. L. Westbee Vice President AGREED TO AND ACCEPTED BY: /s/ Walter S. Blume Walter S. Blume Date: May 14, 1971 A37 Court finds that interpretation of the May 3 letter-agree- ment will be highly relevant in determining the parties’ intention with respect to the crucial June 26, 1972 letter amendment, As with any issue involving construction and inter- pretation of contractual provisions, the fundamental and cardinal rule is that the intention of the parties must be ascertained and given effect. O’Neill v. German, et al., 154 Ohio St. [p. 14] 565, 570 (1951); State, ex rel. Maher v. Baker, 88 Ohio St, 165, 172 (1913). In determining the intent of the parties, primary resort should be to the language employed by the parties in the written instrument. New York Central Railroad Co, v, General Motors Corp., 182 F. Supp. 273, 284 (N.D. Ohio, 1960); State ex rel. Maher v. Baker, 88 Ohio St., at 172, and such language will be given effect if it is not ambiguous. New York Central Railroad Co, v, General Motors Corp., 182 F. Supp., at 284-85; Carroll Weir Funeral Home v., Miller, 2 Ohio St, 2d 189, 192 (1965); Lawler v. Burt, 7 Ohio St. 341, 350 (1857). If the language employed by the parties is ambiguous, however, parol evidence can be resorted to to determine the intent of the parties. Quarry Co. v. Clements, 38 Ohio St. 587, 590 (1882); 12 O. Jur. 2d, Evidence, §§ 663, 664, 669 (1956); 11 O. Jur. 2d, Contracts, § 160, at 408 (1955). In this case all parties agree, and the Court so finds, that crucial terms used in both the May 3, 1971, and the June 26, 1972, letter- agreements are ambiguous and hence parol evidence is admissible to enable this Court to determine the intent of the parties. The Court finds that the May 3, 1971, letter-agreement was negotiated by the parties to permit Mr. Blume to acquire the Oster sintered magnet facility without violating Article II of his 1967 employment agreement with 3M. A38 In order to put into effect the intent of the parties, the proposed agreement contained a broad clause releasing Mr. Blume to acquire “the John Oster facility or some other facility for making and/or selling cast or sintered magnets” subject to certain conditions enumerated in clauses I-IV (jx IV). [p. 15] Clause I, at the heart of this entire controversy, will be dealt with below, Clauses II and III (which are in all material respects the same as clauses I and II in the second letter-amendment of June 26, 1972, agreed to between the parties) provide that if Mr. Blume developed or acquired any U.S, patent having utility for flexible magnets (including those mag- nets produced by 3M under the Blume patents) he would offer to 3M a nonexclusive, royalty-free license for the life of such patents, and that if such a patent involved a super-magnet (that is, a flexible magnet of an energy product of at least 2.25 x 10° gauss-oersteds), 3M would in turn give Mr, Blume a nonexclusive, royalty-free license under the Blume patents 3M acquired from Leyman to make, use and sell flexible magnets of that energy level (tr. 116-18). Clause IV, when read in conjunction with the broad release clause, provides that if Mr. Blume ac- quires a sintered magnet facility prior to September 30, 1973, he would be released to make and sell apparatus for testing magnets or magnetic compositions (such as the gaussmeter, an instrument which Mr. Blume subse- quently developed) (tr. 187). Up to this point, the intent of the parties is relatively clear and the parties are, we think, in basic agreement about the effect of the proposed contract terms. The basic difficulty with this document comes from fitting clause I reasonably into place. The defendant contends that the term “Matrix-bonded Permanent Magnet,” as used in this document, is specifically defined on page 1 to mean the magnets produced under the Blume patents assigned to A39 Leyman [p. 16] and subsequently acquired by 3M.’ De- fendants then interpret clause I of the May 3 letter agree- ment by putting a heavy emphasis on the opening clause —‘‘Prior to May 1, 1976." The meaning, the defendants argue, is clear—under clause I, Mr, Blume is prohibited from engaging in the “(1) design, (2) development, (3) manufacture, or (4) sale” of the magnets produced under the Blume patents" only prior to May 1, 1976. Conse- quently, subsequent to May 1, 1976, Mr. Blume claims he is free to make, use and sell the magnets produced under the Blume patents (‘“Matrix-bonded Permanent Magnets”). The result is that Mr, Blume by implication gets a royalty-free license under both the longer-lived 675 and the shorter-lived 275 patents for the remainder of their respective terms (tr. 766-67).° {p. 17] The plaintiff, on the other hand, contends that to read the term “Matrix-bonded Permanent Magnets” 7. The defendants read the term “such permanent magnets” at the beginning of the third sentence on page 1 of the May 3 agreement as referring to the prior sentence, viz., “permanent magnets comprising anisotropic, substantially domain size par- ticles of permanent magnet material which had been mechanically oriented and which were bonded together by nonmagnetic matrix material.” This, defendants contend, constitutes a definition of the sole product of Leyman Corporation produced under the Blume patents (tr. 96-99). .. Subject, of course, to the exceptions provided in clauses II 9. The expiration dates for the patents involved in the case are as follows: Expiration Date No. 2,999,275 September 12, 1978 No. 3,235,675 February 15, 1983 No, 3,312,763 April 4, 1984 No. 3,359,152 December 19, 1984 Under the defendants’ reasoning, Mr. Blume would get a royalty-free license under the 275 patent for a period of ap- proxima one year and four months and a royalty-free license under the 675 patent for a period of approximately six years nine months, A40 as limited solely to the product produced by Leyman, and subsequently 3M, under the Blume patents is to ignore the remainder of the third sentence which differentiates “Matrix-bonded Permanent Magnets” from “cast or sin- tered magnets such as the aluminum-nickel-cobalt alloys now sold as ‘Alnico’ magnets” (jx IV). By reading the entire sentence, plaintiff maintains, it is clear that the term “Matrix-bonded Permanent Magnets” is broader than the sole product of Leyman produced under the Blume patents and is interchangeable with the term “flexible magnets” (tr. 777-778). Using this definition in clause I, plaintiff asserts, gives it the more natural meaning it was intended to have as a 5-year extension of the restrictive noncompete agreement contained in Article II of Mr. Blume’s 1967 employment agreement with 3M (tr. 777).'° [p. 18] The result is that, prior to May 1, 1976, Mr. Blume is restricted from competing with 3M in the broader field of flexible magnets (subject, of course, to the exceptions contained in clauses II and III) and, after that date, Mr. Blume is free to enter the broader field of flexible mag- 10. This was the reason for the May 1, 1976, date being chosen. May 1, 1976, is approximately 5 years from the May 3, 1971, date of the letter-agreement (tr. 628). 3M asserts, and this Court finds, that the May 1, 1976 date was chosen as a limitation on the restrictions embodied in clause I of the May 3, 1971, letter-agreement and clause B of the June 26, 1972, letter-agreement in order to avoid the ee application of the “blue-pencil’ rule by the courts. he “blue-pencil rule” (which has now been abandoned by the Ohio courts, see Raimonde v. Van Vlerah, 42 Ohio St. 2d 21 (1975)) provides that: “.. . if unreasonable provisions [such as a restrictive cove- nant] exist in [an employment] contract, they may be stricken if divisible, but not amended or modified. It also provides that if restrictions are unreasonable and indivisible, the entire contract fails.” 42 Ohio St., at 23; Extine v. Williamson Midwest, Inc., 176 Ohio St. 403 (1964). 3M’s fear in drafting these two extensions of the original re- strictive covenant was that if they were not reasonably restricted conce a time limitation, they would either be entire stricken from the contract or cause the entire contract to fa (tr. 628); doc. 87, at 3, 9. A4l nets, but not to infringe the Blume patents held by 3M until they expire.” This Court has found this dispute a difficult one to resolve. To accept the plaintiff's interpretations, among other things, puts a strain on the language in the first paragraph defining the term “Matrix-bonded Permanent Magnets.” Defendants’ interpretation, on the other hand, renders sentences in clauses II and III unnecessarily com- plex and, in some cases, meaningless.’* Defendants’ inter- pretation also places excessive emphasis on the “prior to” language of clause I in order to create an implied license in a document that, in one place, explicitly refers to “a nonexclusive, royalty-free license to make magnets .. . under and for the life of any patents 3M acquired from Leyman Corporation” (jx IV, clause III). For reasons that will become clear below, we think that the plaintiff's interpretation was the one intended by the parties. [p. 19] To begin with, we think that the more reason- able construction of clause I is that the parties intended it as an extension (with a narrower scope) of the five- year restrictive noncompete covenant contained in Article II of Blume’s 1967 employment agreement. That this was 3M’s intention is relatively clear from several factors. First, during the period involved in this case, 3M had 11. See note 9, supra. 12. For example, to accept defendant’s interpretation of the term “Matrix-bonded Permanent Magnet” as strictly limited to magnets made solely under the Blume patents would translate into an interpretation of lines 7-9 of clause II as follows: If you acquire a patent on a new development, you shall offer to 3M a nonexclusive, royalty-free license for the life of any such patent to make, use and sell magnets produced under the original Blume patents which 3M already held. Clearly, as used in both clauses II and III the term “Matrix- bonded Permanent Magnets” had a broader meaning than that asserted by defendant Blume. A42 a special subcommittee, the Patent, Trademark and Copy- right Subcommittee of the Management Committee, whose function, among other things, was to authorize grants of licenses under patents held by 3M (px 57, 58; tr. 639). Mr. William Abbott, a former director and special counsel to 3M, was chairman of this subcommittee and from time to time made determinations whether a particular matter should be brought to the attention of the subcommittee (tr. 643-44). It was Mr. Abbott’s testimony at trial that he and Mr. Granrud (the drafter of both letter-amendments ) discussed clause I of the May agreement, that the ex- tension of the restrictive covenant was thought by them to be in consideration for the release granted Mr. Blume to go into the sintered magnet business, and that he, Mr. Abbott, determined that it was not necessary for the May 3rd letter-amendment to be reviewed by his particular patent subcommittee (tr. 647-48). His reason for this decision was because, in his opinion, “there was no immediate problem with granting a license” since the agreement did not contain a grant of a patent license ex- cept on the conditions stated in clause III, “conditions that might never occur” (tr. 648-49). Second, the Court finds that the inclusion of a specific reference to a license in clauses II and III of the May 3, 1971, agreement tends to negate the intention of 3M [p, 20] to grant a license by such an oblique reference as the “prior to” language of clause I of the May agreement. Third, the testimony of all 3M witnesses involved in the drafting of this May 3 letter-agreement (admittedly dis- puted by the defendants) was that it was not 3M’s inten- tion to grant a license to Blume under clause I (tr. 630-31; 648; 705-06). In spite of their [p. 21] obvious interest in the outcome of this case, we feel that their testimony is credible. Fourth, prior to the parties’ execution of A43 the May 3 letter-agreement, there were several changes made in earlier drafts which reflected the intentions of the parties. One of these changes was the substitution of the term “flexible magnets” for the term “Matrix-bonded Permanent Magnets” at the end of the second sentence of the third paragraph.” In a letter from Mr. Granrud to Mr. Blume dated April 19, 1971 (dx 198), Mr. Granrud explained this substitution. It was necessary to substitute the term “flexible magnets” for the term “Matrix-bonded Permanent Magnets,” Granrud explained, because the Blume patents held by 3M “would prevent [Blume] from making Matrix-bonded Permanent Magnets and we [3M] don’t want any implication to the contrary.” (tr. 192-93; dx 198). (Emphasis added.) We think the clear import of this language, [p. 22] despite its confusion in terms, was that, under the earlier wording, interpretation was possible that Blume would be free to make magnets under the patents held by 3M at the end of his restrictive non- compete covenant and that 3M did not want such an implication read into the 1967 agreement—a factor we 13. The change altered the sentence to read as follows (with the original in brackets): “Of course, the aforementioned Article II was primarily intended to prevent you from making and/or selling Matrix- bonded Permanent Magnets, but your entry into the manu- facture and sale of cast or sintered magnets at the present time would obviously put you in a better position to begin making flexible magnets [Matrix-bonded Permanent Mag- nets] after September 30, 1973.” Defendants, of course, assert that this change in language in- dicates that plaintiff intended a difference between the terms “flexible magnets” and “Matrix-bonded Permanent Magnets” and that this alteration in the terms of the agreement clearly supports defendants’ position that the latter term was clearly limited to the magnets produced under the Blume patents (defendants’ proposed findings of fact and conclusions of law No. 6). We find that this substitution of terms, when examined in light of the entire document, is indicative of Mr. Granrud’s confusion with respect to his use of the terms “Matrix-bonded Permanent Mag- nets” and “flexible magnets”—a confusion admitted by Mr. Gran- rud on cross-examination (tr. 592-93). A44 find indicative of 3M’s intent both with respect to the restrictive covenant in the earlier 1967 employment agree- ment and with respect to the later May 3, 1971, extension of the restrictive covenant under negotiation between the parties at that time. Thus, at the time the May 3, 1971 agreement was executed between the parties, we think it was 3M’s clear intent that clause I of the agreement would act as a five-year extension of the original restric- tive covenant agreed to between the parties and nothing more. To controvert this point, defendants presented the testimony of Mr. Richard Evans, Mr. Blume’s attorney at the time of the 1967 employment agreement and the subsequent May, 1971 letter-amendment to that agree- ment (tr. 447, 461).1* It was Mr. Evans’ testimony that, subsequent to the negotiation of the May 3 letter-amend- ment between Mr. Blume and 3M, but prior to its execu- tion, he was asked by Mr. Blume to give him an opinion as to its meaning (tr. 461, 502; dx 305). Based solely on the language of the agreement, it was Mr. Evans’ opinion that, under clause I of the May 3 letter-amend- ment, Mr. Blume was excluded from making magnets under the patents held by 3M until May 1, 1976, and that “thereafter he was free to do so” (tr. 465, 502-03). Subse- quent to the execution of the May 3, 1971, [p. 23] letter- amendment, Mr. Blume applied for a Small Business Administration (SBA) loan to partially finance his ven- ture into the sintered magnet business (dx 303) and, in connection with this application, requested Mr. Evans to render an opinion letter to the SBA explaining Mr. Blume’s rights and responsibilities under the May 3rd letter-agreement (tr. 460-62). This Mr. Evans did on 14. Mr. Evans apparently last represented Mr. Blume some time in 1975 (tr. 471). A45 July 9, 1971, in a letter to Mr, Cotton of the SBA (dx 304). In this letter, Mr. Evans stated as follows: “The agreement expressly excludes Mr. Blume from manufacturing ‘matrix-bonded permanent magnets,’ until May 1, 1976. The excluded type of magnets are those which are covered by a series of patents which Mr. Blume assigned to 3M several years ago” (dx 304, p. 1). In spite of the fact that this Court believes Mr. Evans’ testimony, several things must be taken into account in evaluating it. First, it is undisputed that Mr. Evans was not a party to the negotiations between 3M and Blume leading to the May 3 letter-agreement and had no direct contact with 3M concerning the meaning of that agree- ment (tr. 460-61, 502)..° Thus, Mr. Evans cannot testify as to the intent of 3M in drafting and executing this agreement. Fed. R. Evid. 602. Second, Mr. Evans’ testi- mony as to the meaning of this document is not binding on us since it is the Court’s function to determine the meaning of these documents. Third, to the extent that Mr. Evans’ testimony as a fact witness sheds light on Mr. Blume’s intent, we must be mindful that our aim in construing the provisions of [p. 24] this agreement is to determine the joint intent of the parties. O’Neill v. German, et al., 154 Ohio St. 565, 570 (1951). It is clear that the unexpressed intention of one party to a contract cannot bind the parties. New York Central Ry. Co. v. Mahoney, 252 U.S. 152, 157 (1920); Bach v. Friden 15. In his letter to the SBA, Mr. Evans stated that he was “familiar with the agreement, having assisted Mr. Blume in the negotiations which led to the agreement” (dx 304). By this sen- tence, however, Mr. Evans stated at trial he meant that he merely discussed with Mr. Blume after it had been negotiated between Mr. Blume and 3M and that he “assisted to the extent of telling [Mr. Blume] what it was I thought that the agreement said (tr. 501-02). (Emphasis added.) A46 Calculating Mach. Co., 155 F.2d 361, 365 (6 Cir., 1946); Myers v. Sunlight Laundry Co., 10 Ohio Opp. 275 (Ct. App. Hamilton Co., 1918); Restatement of the Law, Con- tracts § 20, Comment a (1932); 11 O. Jur, 2d Contracts §$ 18, at 263 (1955). Given the close relationship of the parties in this case (Mr. Blume and Mr. Blankenbaker), we think that Mr. Blume knew or had reason to know that clause I of the May 3, 1971, agreement was intended by 3M to be merely an extension of the Article II non- compete agreement in the 1967 contract, and was not intended to be an express or implied grant of a license. It is clear that an offeree who knows what the offeror intended by an ambiguous offer and also accepts it is bound according to the intent of the offeror. Butler v. Moses, 43 Ohio St. 166, 170-71 (1885); 11 O. Jur. 2d Con- tracts § 134, at 380 (1955). We think that is the situation presented here. Mr. Evans took no part in the negotiations between the parties and his interpretation of the May 3 letter-agreement was based solely on the text of the document (tr. 461, 502).2° In light of Mr. Blume’s close [p. 25] relationship with Mr. Blankenbaker and his rea- son to know of 3M’s intent, we do not think it can be said that Mr. Blume reasonably relied on what he now asserts is his interpretation of the May 3 letter-agreement. There is no evidence anywhere in this record that Mr. Blume ever attempted to clarify the nature of his rights under clause I of the May 3 agreement with 3M—an 16. Mr. Evans admitted that he arrived at his interpretation of clause I because he understood the term “Matrix-bonded Per- manent Magnets” to include only the magnets produced under the Blume patents held by 3M and “there was no way [he] knew of that anybody could make matrix-bonded permanent magnets without infringing those patents” (tr. 467; dx 304). This Court has already determined that the intent of the parties in using the term “Matrix-bonded Permanent Magnets” in the May 3 letter-agreement was to refer to a broader class of magnets than those produced solely under the Blume patents held by 3M. See p. 18, supra. A47 omission especially significant, we think, in light of the parties’ intent and purpose in negotiating the agreement and the interpretation of that clause Mr. Blume later received from his lawyer, Mr. Evans, shortly prior to signing the agreement. Given the importance of the rights Mr. Blume alleges he received under his highly technical reading of clause I and the purpose and intent of the parties in negotiating the agreement, we think it was incumbent upon Mr. Blume to clarify his under- standing of his rights with 3M. He cannot now, we think, take advantage of his failure to do so. As we mentioned earlier, Mr. Blume investigated the sintered magnet market following his acceptance of the May 3 letter-agreement and eventually decided against acquiring either the Oster facility or any other facility for the production of cast or sintered magnets due to an unanticipated depression in the manufacturer’s selling price of cast or sintered magnets (tr. 127-28, 711-13). When it became apparent to Blume that he would not acquire the Oster facility under the May 3 letter-agree- ment, he went to St. Paul on November 19, 1971, and met with Blankenbaker, Granrud and others (tr. 128, 269-70, 696-97, 718). The purpose of this visit was so that Mr. Blume could assist Mr. Granrud, [p. 26] at Granrud’s request, in connection with the prosecution of the German counterpart to the 275 patent, which at the time had been placed in opposition. During the course of this November 29th meeting, the subjecc of a broader release from the October 1, 1967, restrictive covenant, as amended by the May 3, 1971, letter-agree- ment, was discussed. The parties are in disagreement over the scope of the release requested by Mr. Blume at this meeting. The plaintiff contends that Mr. Blume requested a release to make “noninfringing products, non- infringing [flexible] magnets” which would only be “low A48 energy flexible magnets’? and/or a license under his patents to make a magnet with an energy level in the range of the magnet being produced by The B. F. Goodrich Co., a 3M licensee.'* The defendant, on the other hand, [p. 27] contends that he did not specifically limit his request for a release to low energy magnets—rather, he states that he requested a release to make “noncompetitive, noninfringing magnets” with “energy products .. . higher than Goodrich, or as good as Goodrich was producing” (tr. 271, 276). Although the contours of this disagree- ment are somewhat unclear to us,’® we find that Mr. Blume requested a release (and/or license) to make both 17. By “low energy flexible magnets,” the plaintiff refers to magnets with an energy product in the .45 x 10° gauss-oersted range (tr. 543-44). The 3M product produced under the Blume patents and sold under the trade name ‘“Plastiform’” has an energy product of about .8-.9 x 10° gauss-oersteds (tr. 545, 556). 18. At the time of its acquisition by 3M, Leyman had an infringement action pending against B. F. Goodrich involving the Blume patents. This suit was subsequently settled between 3M and Goodrich, with the result that Goodrich paid 3M $100,000 for past infringements on the Blume patents, agreed to pay royalties based on a sliding scale, and, in return, received a license under those patents to produce magnets in the energy range of .8 x 10° gauss-oersteds (tr. 632-634; px 16). One aspect of that license agreement with 3M which is im- portant for this suit is its “Most Favored Nations Clause,” which was in effect at the time of the 3M-Blume June 26, 1972, letter- agreement. The effect of this clause was that if 3M did grant Blume a license under his original patents, it would have to be on terms “no more favorable to Blume than to B. F. Goodrich” (px 16). Hence, if 3M granted Blume a broader license under his — than it had previously granted to Goodrich, 3M would ve to give Goodrich, as a prior licensee under the ‘Most Favored Nations Clause,” the same broader license (tr. 327-28, 547-48; px 16). 19. It appears to us that the parties have taken their respec- tive positions on this issue in order to bolster their positions on the of negotiations between the parties leading up to the June 26, 1972, letter-amendment. 3M contends that Blume requested a release for low energy “noninfringing” magnets and a license under his patents because he clearly recognized that he did not have a license under the earlier May agreement. Blume, on the (Continued on following page) A49 low and high energy magnets with specific reference to the magnets ther. being produced by The B. F. Goodrich Company under the Blume patents (magnets with an energy of 8 x 10° gauss-oersteds) (tr. 271-76, 544-45, 600-01; px 16). As Mr. Blume testified: “I asked specifically, asked that if I produce the mate- rial, noninfringing material with energy products higher than those people such as I mentioned, Good- rich, specifically, higher than Goodrich, or as good as Goodrich was producing, would you turn your back, what would you do [?] I did not receive an answer, nothing but smiles” (tr. 271, 276). The outcome of this November 29, 1971, meeting in St. Paul was that 3M would take Mr. Blume’s requests under advisement, and they would get back to him with their decision (tr. 546, 600, 698). We think that the subsequent evidence of the [p. 28] parties’ intent prior to June 26, 1972, reveals that even if Mr. Blume did request a license to make products of an energy level equivalent to or higher than that of Goodrich, it was not 3M’s intent to grant him such a license by the June 26 letter-agreement, and there were no facts on which Mr. Blume reasonably could rely in thinking that he received such a license. Subsequent to the November 29 meeting, Robert Granrud recorded the substance of Blume’s alternative Footnote continued— other hand, contends that he requested a release to get back into the magnet business at “[a]ny energy that [he] could make” and therefore it was reasonable for him to conclude that he had a license under the provisions of the June 26, 1972 letter-amendment (tr. 277). We find Blume’s argument unconvincing in light of his contention that he received his license under the provisions of both the May 3, 1971 and June 26, 1972 letter-amendments (tr. 301-05)—for if Mr. Blume actually thought he received a license under the provisions of the May 3 letter-amendment, why would he need to request 3M’s permission to make high energy magnets in November, 19717? A50 requests for (1) a release to make noninfringing low energy magnets and (2) what Mr. Granrud characterized as a “license” under the 3M-Blume patents to make magnets in the 0.8 range, in a letter to Mr. William Abbott, chairman of 3M’s Patent, Trademark and Copyright Subcommittee (px 16) for Mr. Abbott’s consideration.”” Mr. Abbott’s function in the granting of [p. 29] patent licenses by 3M Corporation as well as those of his committee have been previously discussed.” Suffice it to say here that Mr. Granrud, Mr. Abbott and Mr. Blankenbaker discussed Mr. Blume’s requests further and determined that 3M would 20. Px 16 reads: Dear Mr. Abbott: * * o . * a After looking at other things, Blume has decided that all he wants is to get back into the magnet business. Re- cently he came close to purchasing a ceramic magnet facility, and to permit him to do so, a supplemental agreement dated May 3, 1971 (copy enclosed) waived the restriction that would otherwise have prevented him from doing this. How- ever, at the last minute Blume backed out, deciding that the ceramic business has a bad competitive situation. Blume now wants to get back into the flexible magnet business. He is making alternative requests. First, Blume would be satisfied to be permitted by 3M to make unoriented flexible magnets in the 0.5 range. There would be two ad- vantages to 3M in permitting him to do so: (1) the added three years of noncompetition as to oriented flexible magnets provided by the supplemental agreement of May 3 would come into effect, and (2) Blume thinks that getting into the magnet business would give him a good chance to develop a 2.25 flexible magnet, and if he succeeded, 3M would get a royalty-free license. Blume would prefer not to be restricted te unoriented magnets but hopes 3M will permit him to manufacture mag- nets having an energy product up to 0.8, but not above. This would require that Blume be licensed under 3M’s patents with provisions no more favorable to Blume than to B. — A copy of the 3M-Goodrich license is at- [With respect to the 3M-Goodrich license, see note 18 supra. ] 21. Seep. 19, supra. A51 be willing to narrow the scope of Blume’s restrictive cov- enant (tr. 599-601, 628, 650, 698). It was their decision that the restrictive covenant (contained in Article II of Blume’s 1967 employment contract, as modified by clause I of the May 3, 1971, letter-agreement) should be nar- rowed so as to be coextensive with the scope of 3M’s rights under the two Blume patents (275 and 675) (tr. 600-01, 648, 628, 650), and to be limited in time to avoid invalidation by a court applying Ohio’s “Blue Pencil Rule.” This Court is unclear why it was necessary for 3M to resort to such a complicated process of reasoning in order to protect rights which 3M already held under the Blume patents. It would have been much less complicated, in this Court’s opinion (and far less burdensome from a litiga- tion point of view), for 3M to release Blume to make any magnets he wanted to so long as he did not infringe his patents—period. 3M asserts, however, and this Court finds, that it was 3M’s intent in drafting the June 26 letter-amendment to give it “two strings to its bow,” so that if Blume infringed his patents within the five-year period, 3M would have either a right to sue in tort for infringement or in contract under the restrictive covenant. See United Lens Corp. v. Doray Lamp Co., 93 F. 2d 969, 971 (7 Cir., 1937); Bruhn v. S.T.P. Corp., 312 F.Supp. 903, 905 n. 1 (D. Colo., 1970); Battelle Development Corp. v. Angevine-Funke, Inc., 165 U.S.P.Q. (BNA) 776, 778 (C.P. Franklin Co., 1970). The benefit to 3M [p. 30] from having a contractual right in addition to a right under the Blume patents was apparently that if Blume did in- fringe within the five-y»ar period, it would not be “neces- sary for [3M] to prove the validity of the patents in 22. See note 10, supra. A52 order to be entitled to enforcement of the agreement by the Court.” 165 U.S.P.Q. (BNA), at 778; (tr. 650). Al- though the legal question underlying 3M’s view of the benefit it received by having “two strings to its bow” is not so clearly established in this Court’s mind as it is in the mind of 3M’s counsel,” We find that it was 3M’s intent in drafting the June 26, 1972, letter- agreement, as well as the correspondence which led up to it, to limit Blume’s restrictive covenant both in time (so as to avoid Ohio’s “Blue Pencil Rule”) and in scope (so as to make the covenant coextensive with 3M’s rights under its patents) while giving 3M “two strings to its bow” in tort and contract to sue Mr. Blume, should he infringe his patents prior to May 1, 1976. After this decision was made, Mr. Granrud was en- trusted with the responsibility of notifying Mr. Blume of this decision and of confirming the nature of the pro- posed agreement by letter with Mr. Abbott. This Mr. Granrud did on December 30, 1971 (jx V; px 17). These two letters confirm this Court’s understanding of the par- ties’ intentions with regard to the proposed letter-amend- ment. {p. 31] Mr. Granrud’s letter to Mr. Blume, reproduced in the margin,” makes it explicitly clear that. in vro- 23. See Massillon-Cleveland-Akron Co. v. Golden State Co., 170 U.S.P.Q. (BNA) 440, 443 (9 Cir., 1971) (based on “the im- portant public interest in permitting full and free competition in the use of ideas which are in reality embodied in the public domain,” see Lear Inc. v. Adkins, 395 U.S. 653, 670 (1969), “a valid patent is a prerequisite to recovery” for a breach of a con- tract not to infringe). 24. Jx V reads: Dear Mr. Blume: 3M Company sent you a letter dated May 3, 1971 grant- ing you a partial release from the agreement dated October (Continued on following page) A53 ducing the “Matrix-bonded Permanent Magnets” Mr. Blume would be released to produce, Mr. Blume must not infringe “any unexpired patent in your name which 3M obtained with its purchase of the Magnetic Divi- sion of the Leyman Corporation, especially your U.S. Patent No. 2,999,275” (jx V). (Emphasis added.) There is no time limit included in this December 30th letter on this obligation of Mr. Blume. Defendant, however, [p. 32] points to the language in the December 10th letter which limits the term “‘Matrix-bonded Permanent Magnet” Footnote continued— 1, 1967 between you and 3M in order to permit you to acquire a whole or controlling interest in a facility for making and/or selling cast or sintered magnets. However, you now indicate that you are no longer interested in entering the sintered magnet business, and unless you do so, the conditions under which that partial release was granted will never take effect. You now request from the 3M Company a partial re- lease from the October 1, 1967 agreement in order to permit you to manufacture and sell ‘““Matrix-bonded Permanent Mag- nets” (as that term is defined in the aforementioned letter of May 3, 1971). Mr. Blankenbaker is willing to grant you such a release so long as the Matrix-bonded Permanent Mag- nets which you manufacture do not infringe any unexpired patent in your name which 3M obtained with its purchase of the Magnetics Division of the Leyman Corporation, espe- cially your U. S. patent No. 2,999,275. Such release will be subject to the sort of conditions of the aforementioned letter of May 3, 1971. Mr. Blankenbacker is rather sure that 3M management will go along. Please understand this letter does not serve as a release but that it will be necessary for 3M Company to send you a letter of the same type as the letter of May 3, 1971. How- ever, there should be no need for that letter until you have decided to manufacture Matrixebonded Permanent Magnets on this basis. As soon as you have made this decision, please let us know, and we will seek the necessary approval. Very truly yours, /s/ Robert E, Granrud Robert E. Granrud A54 to its definition in the May 3 letter-amendment. This lan- guage, defendants contend, when combined with the men- tion in the December 30th letter that the proposed release “({would] be subject to the sort of conditions of the... letter of May 3, 1971,” indicates that Mr. Blume was clearly intended to be granted a license after May 1, 1976, to make magnets under the 275 and 675 patents (tr. 251). This argument by the defendants is merely further elabora- tion of the defendants’ earlier argument concerning the meaning of the term ‘“Matrix-bonded Permanent Magnet” in the two letter-agreements and the effect of clause I in the May 3, 1971 letter-amendment—arguments we have already rejected.*° Yet, even if we were to accept at this stage defendants’ argument that the term “Matrix- bonded Permanent Magnets” was clearly intended by the parties to be limited to the magnets produced under the Blume patents, it is clear that a significant segment of the December 30th letter would be meaningless. For ex- ample, how could 3M be “willing to grant [Mr. Blume] ... a release” to make “Matrix-bonded Permanent Mag- nets” (as defined by the defendants), while, in the same sentence, specifically limiting such a release to non- infringing magnets (jx V)? We find, rather, that the letter of December 30th from Mr. Granrud to Mr. Blume explicitly informed Mr. Blume that he would be released to make noninfringing Matrix-bonded Permanent Magnets and that, in making these magnets, he must not in any case, infringe the patents held by 3M without limitation as to time. We also find that this meaning was [p. 33] understood by Mr. Blume or should have been so under- stood by him (in light of the negotiations held up to that time and the meaning of the May 3, 1971, letter). 25. See pp. 15-18, supra. A55 The December 30th letter from Mr. Granrud to Mr. Abbott, reproduced in the margin,*’ contains 3M’s conten- tion that the proposed letter amendment was intended by 3M to limit Blume’s restrictive covenant both in time and space while giving 3M “two strings in its bow” should Mr. Blume infringe his [p. 34] patents prior to May 1, 1976. Following his discussion of the necessity for limiting Mr. Blume’s covenant in time so as to avoid the applica- tion of Ohio’s Blue Pencil Rule,*’ Mr. Granrud clearly alludes to 3M’s understanding of the “two strings to its bow.” As Mr. Granrud stated, “even if a court were to hold the [restrictive covenant] provision to be unduly harsh and thus unenforceable [under the Blue Pencil test], Blume would be in a poor position as the infringer of any of his patents.” Taken together, the two letters demonstrate 3M’s intention with respect to the proposed letter amendment and, more importantly, that 3M com- 26. Px 17 reads: Dear Mr. Abbott: One of the conditions of the May 3, 1971 letter by which 3M released Walter Blume to manufacture sintered magnets was that Blume vould not manufacture Matrix-bonded Permanent Magneis for five years, You raised the question whether this provision is unduly harsh. When 3M sends the letter promised in my letter today to Mr. Blume, we will want to modify that condition to the extent that Blume will agree not to infringe any of 3M’s Blume patents for 4 or 5 years (e.g., until the same May 1, 1976 date as is recited in paragraph 1 of the May 3 letter. That does not seem nearly as harsh as the five-year pro- vision in the May 3, 1971 letter. As you pointed out, even if a court were to hold the provision to be unduly harsh and thus unenforceable, Blume would be in a poor position as an infringer of any of his patents. The basic Blume patent No. 2,999,275 expires September 12, 1978. Very truly yours, Robert E. Granrud REG:rm 27. See note 10, supra. A5S6 municated to Mr. Blume its intent, in granting the requested release, that Mr. Blume “not infringe any unexpired patent in [his] name which 3M obtained with its purchase of the Magnetics Division of Leyman Corporation, especially ..+ U.S. patent No, 2,999,275” (jx V).** On January 16, 1972, Mr. Blume responded to the letter from Mr. Granrud (jx VI). In accordance with the last paragraph of Mr. Granrud’s letter,“’ Mr. Blume [p. 35] indicated that he was proceeding in his search for a “suitable business location” and that he “expect[ed] to write to [Mr. Granrud] shortly and affirmatively in terms of having acted on the various aspects covered in your letter and to pursue in detail the kind consideration given me” (jx VI). The record reflects that on May 24, 1972, Mr. Blume contracted to purchase land on which to erect a facility (tr. 136-37; dx 332). Then, on May 27, 1972, Mr. Blume wrote to Mr. Granrud and requested 3M to proceed “on the matter covered in the second para- graph of your December 30, 1971 letter” (jx VII). This Mr. Granrud did, submitting to Mr. Blume a draft of a proposed letter-amendment (dx 327), which, with minor 28. Defendant points to the opening sentence of the second paragraph of Granrud’s letter to Abbott (px 17) as indicating that 3M only intended to limit Blume from manufacturing mag- nets under his patents “for 4 or 5 years (e.g. until the same May 1, 1976 date as is recited in paragraph 1 of the May 3, 1971 letter”—that is, that after the May 1, 1976 date, Mr. Blume got a license under his patents (px 17). We find this construction of the sentence untenable. Rather, we think the sentence’s more natural meaning, in the context of 3M’s “two strings to its bow” contention referred to in the same paragraph, was to emphasize the necessity of limiting 3M’s contract rights under the proposed agreement not to infringe for a period of “4 or 5 years” so as not to run afoul of Ohio’s “Blue Pencil Rule.” See note 10, supra. As the letter goes on to state, “that [agreement not to infringe any of 3M’s Blume patents for 4 or 5 years] does not seem nearly ata as the five-year provision in the May 3, 1971 letter” (px 29. See note 24, supra. A57 modifications not material to this case, became the second letter-amendment agreed to by the parties. Following re- ceipt of this draft agreement, Mr. Blume closed the pur- chase on his piece of land (tr. 140; dx 339). Finally, 3M drafted and submitted to Mr. Blume the second letter- amendment of June 26, 1972, incorporating the changes made from the draft (tr. 140-41; jx VIII; dx 337). This letter-amendment was accepted and returned by Mr. Blume to 3M on July 5, 1972 (jx IX) and is reproduced in full in the margin (jx VIII). 30. Jx VII reads: Dear Mr. Blume: On September 30, 1967, Minnesota Mining and Manu- facturing Company (“3M”) purchased from the Leyman Corporation its Magnetics Division which you had created and were heading, including a number of patents in your name. Your single product was permanent magnets com- prising anisotropic, substantially domain size particles of permanent magnet material which had been mechanically oriented and which were bonded together by a non-magnetic matrix material. Such permanent magnets are hereinafter referred to as “Matrix-bonded Permanent Magnets” and are appreciably different from cast or sintered magnets such as the aluminum-nickel-cobalt alloys now sold as “Alnico” magnets. Since that date, 3M has continued the business of making and selling Matrix-bonded Permanent Magnets, {p. 36] Also on September 30, 1967, by a separate agree- ment with you 3M purchased your equity in the Magnetics Division of the Leyman Corp., and by a written agreement dated October 1, 1967, you were employed by 3M for one year. Article II of that agreement prevents you from par- ticipating in the manufacture or sale of any sort of magnet or magnetic composition until September 30, 1973, five years after your employment terminated. Our letter of May 3, 1971 released you in part from the agreement of October 1, 1967 to permit you to acquire a facility for manufacturing sintered magnets. Your plans have since changed, and you now have requested a somewhat broader release. This letter, which is a substitute for the letter of May 3, 1971, shall serve to release you to A. Establish or acquire facilities for making and/or selling cast or sintered magnets and/or (Continued on following page) A58 The Couwit finds that the intent and purpose of the parties in agreeing to the second letter-amendment was similar to that behind the first letter-amendment—to [p. 37] permit Mr. Blume to enter into the production of certain magnets without violating Article II of his 1967 employment agreement with 3M. We note that the struc- Footnote continued— B. Establish or acquire facilities for making and/or selling Matrix-bonded Permanent Magnets, with the express understanding that in making such Matrix- bonded Permanent Magnets you will not prior to May 1, 1976 infringe any unexpired patent in your name which 3M obtained with its purchase of the Magnetics Division of the Leyman Corporation, es- pecially your U. S. patent No. 2,999,275. The foregoing release is subject to the following con- ditions which shall take effect upon your establishing or ac- ogre any such facility at any time prior to September 0,1 . I, If at any time prior to May 1, 1976, you or any com- pany which you own or control should file or acquire a United States patent application having utility for Matrix-bonded Permanent Magnets, you shall promptly furnish 3M with a copy; and whenever a U. S. patent issues on any such patent application or on a division, continuation, or continuation-in-part of any such patent application, you shall offer to 3M a nonexclusive, royalty-free license for the life of any such patent to make, use and sell Matrix-bonded Permanent Magnets and 3M shall release you to engage in the development of Matrix-bonded Permanent Magnets for this purpose. [p. 37] Il. If the patent application mentioned in the pre- ceding paragraph (I) concerns an invention by which Matrix-bonded Permanent Magnets of an energy product of at least 2.25 x 10° gauss-oersteds can be produced, 3M shall grant to you for the immediate benefit of you or your heirs or any assignee of said invention a non- exclusive, royalty-free license to make magnets hav- an energy product of at least 2.25 x 10° gauss-oersteds under and for the life of any of the patents 3M ac- quired from Leyman Corporation, and shall permit you or said or assignees to immediately make, use and sell such Matrix-bonded Permanent Magnets. (Continued on following page) A59 ture of the two letter-amendments is quite similar*’ and that the June 26, 1972 letter states explicitly that it was entered into “as a substitute for the letter of May 3, 1971” (jx VIII). In order to put into effect the intent of the parties, [p. 38] the proposed agreement contained two broad release clauses (A and B) subject to certain conditions enumerated in clauses I-III (jx VIII). Clause A, which released Mr. Blume to “establish or acquire facilities for making and/or selling cast or sintered mag- nets, is similar to that included in the earlier May 3 letter discussed earlier** and so it need not be explained here. Clause B, on which Mr. Blume’s defense of license ulti- mately rests, will be discussed below. Clauses I-IV are, in substance, identical with clauses II-IV of the May 3, 1971 letter-amendment previously discussed** and there- fore also need not ke explained again here. Footnote continued— III. You are released to make and sell apparatus for testing and for magnetizing magnets or magnetic compositions. Upon the foregoing conditions taking effect, Article IV of the October 1, 1967 agreement will be terminated. This letter is submitted to you in duplicate. If the terms and conditions as set out above are satisfactory to you, please sign both copies and then return one fully executed copy to us. MINNESOTA MINING AND MANUFACTURING COMPANY By /s/ Robert L. Westbee R. L. Westbee AGREED TO AND ACCEPTED BY: /s/ Walter S. Blume Walter S. Blume Date: July 5, 1972 31. Paragraphs one and two in both letters are, in fact, identical (jx IV, VIII). 32. See p. 14, supra. 33. See p. 15, supra, A60 From our discussion up to this point, it must be ap- parent to the reader that clause B of the June 26, 1972 letter-amendment contains the “slippery words” which both parties contend mean what they say and say what they, the parties, meant. That clause, in pertinent part, reads as follows: This letter, which is a substitute for the letter of May 3, 1971, shall serve to release you to * * * * * B. Establish or acquire facilities for making and/or selling Matrix-bonded Permanent Magnets, with the express understanding that in making such Matrix- bonded Permanent Magnets you will not, prior to May 1, 1976 infringe any unexpired patent in your name which 3M obtained with its purchase of the Magnetics Division of the Leyman Corporation, especially your US. patent No. 2,999,275. [p. 39] Since clause B of the June, 1972 letter- amendment is the basis upon which Mr. Blume’s license defense ultimately rests, we feel it necessary here to state the positions of the parties as to the meaning of that clause although this will obviously be somewhat repetitive of our prior discussion.“ Defendants, relying heavily on the “prior to” language, contend that clause B immediately released Blume to make “Matrix-bonded Permanent Mag- nets” so long as he did not infringe any of the patents 3M acquired from Leyman (especially the 275) prior to May 1, 1976. After that date, however, defendants contend this clause effectively granted them a license to practice any of the patents 3M acquired from Leyman, including those relating to the manufacture of “Matrix-bonded Per- 34. See pp. 15-18, supra. A61 manent Magnets” as that term is defined on page 1 of both the May 3, 1971 and June 26, 1972 letter amend- ments, viz., “permanent magnets comprising anisotropic, substantially domain size particles of permanent magnet material which had been mechanically oriented and which were bonded together by a nonmagnetic matrix mate- rial.”® Plaintiff, on the other hand, contends that clause B was intended by the parties to act as a release to permit Mr. Blume to [p. 40] establish or acquire facilities for making and/or selling flexible magnets (“Matrix-bonded Permanent Magnets”) subject to certain conditions. One of those conditions, plaintiff points out, was that in mak- ing such flexible magnets Blume must not “prior to May 1, 1976 infringe any unexpired patent in [his] name which 3M obtained [from] Leyman Corporation, especially your U.S. patent No. 2,999,275”—a clause that was clearly in- tended to act as an extension of the restrictive covenant in Blume’s 1967 employment contract, limited in time to avoid invalidation under Ohio’s “Blue Pencil Rule” and 35. See note 7, supra. One of the problems with this argu- ment is that it adopts two different meanings to the term ‘“Mat- rix-bonded Permanent Magnets’’—-one limited to the magnets under the Blume patents and one covering all “flexible magnets,” presumably as the latter term is used by the plaintiffs. See pp. 13, 15-17, supra. To incorporate defendants’ interpretation into the language of clause B would alter it to read as follows: {p. 40] This letter . . . shall serve to release you to * * * * * B. Establish or acquire facilities for making and/or selling Matrix-bonded Permanent Magnets, with the express understanding that in making such Matrix-bonded Per- manent Magnets you will not, prior to May 1, 1976, in- fringe [the patents 3M acquired from Leyman for mak- ing Matrix-bonded Permanent Magnets]. This problem was recognized by both defendants’ counsel (tr 165-66) and by Mr. Blume’s former counsel Mr. Evans. As Mr. Evans stated “there was no way that [he] knew of that any- body could make matrix-bonded permanent magnets without in- fringing these patents .. .” (tr. 467). With regard to Mr. Evans’ testimony see pp. 22-25, supra. A62 in scope so as to make the covenant coextensive with 3M’s rights under its patents. Plaintiff contends it was never intended, nor was it reasonably understood to be an affirmative grant of a license to Blume under the Blume- 3M patents. [p. 41] From our review of the evidence outlined above, we must agree with the plaintiff's contention. We reach this conclusion based on several factors. First, and most important, are the facts as we have found them above concerning the intention of the parties in drafting this agreement and the negotiations leading up to it. Sec- ond, we find our conclusion to be supported by a compari- son of the May 3, 1971 and the June 26, 1972 letter- amendments with respect to organization and structure, keeping in mind the parties’ intent with respect to clause I in the May 3, 1971 letter-amendment as we have found it above. Third, the June 26, 1972 letter-amendment, like the May 3, 1971 letter-amendment,®* was never brought up for review before 3M’s Patent, Trademark and Copy- right Subcommittee** because in the opinion of Mr. Wil- liam Abbott, the chairman of this committee, the June 26, 1972 letter “did not grant a license under any 3M patent, particularly the patents . . . that were acquired from the Lehman [sic] Company.” Neither, in his opin- ion, was the June 26 letter-amendment a “research and development agreement” since, “while Mr. Blume was au- thorized to engage in research, 3M was not paying for the research [nor were they] supplying the facilities for any such research” (tr. 652). Finally, subsequent to June 26, 1972, several events occurred which further reinforce our conclusion. 36. Seep. 19, supra. 37. See p. 19, supra. A63 [p. 42] First, in May of 1973, Mr. Blume wrote a letter to Mr. Georg Gronefeld, Director of the Magnetfabric Bonn of GmbH Gewerkschaft Windhorst, concerning his re-entry into the magnet business** (px 22). In that letter, Mr. Blume informed Mr. Gronefeld that the Electrodyne Company was Mr. Blume’s means of re-entering the magnet business. The letter then went on to state: “However, our plant has only recently been completed. It will take at least a year or two before we become truly productive with regard to magnet manufacture and I am, of course, still obliged to honor the patents I assigned to the 3M Company” (px 22). (Emphasis added.) Second, in the fall of 1973, Mr. Blume began negotia- tions with the Southern Ohio Bank fox a business loan to the Electrodyne Company guaranteed through the Small Business Administration (tr. 414). In support of this loan, Mr. Blume submitted various documents to the Bank, in- cluding a “Business Background and Prospectus” and a copy of the June 26, 1972 letter-amendment (dx 377, 380). In his “Business Background and Prospectus,” Mr. Blume stated the following concerning his relationship with 3M: The applicant believes such circumstances are in his favor and for the purpose of further pursuit in the field of magnetics, he managed to negotiate a partial release from his rather broad unexpired contractual obligation to 3M. This release became effective on May 3, 1971, and was subsequently updated on June 26, 1972. Exhibit 5 attached. 38. Following his receipt of the June 26 letter-amendment, [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385010_0707%3A2. Public record. Not legal advice.