Petition for a Writ of Certiorari — Patch v. Solar Corp.

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Supreme Court of the United States

OCTOBER TERM. 1944

No. 202 —

ALLEN J. PATCH,

Petitioner and Appellee Below,

vs.

SOLAR CORPORATION,

Respondent and Appellant Below.

PETITION FOR A WRIT OF CERTIORARI

TO THE CIRCUIT COURT OF APPEALS

FOR THE SEVENTH CIRCUIT, AND

BRIEF IN SUPPORT THEREOF

JAMES G. NYE,

Attorney for Petitioner,

Alworth Building,

Duluth 2, Minnesota.

THOMAS M. McCABE,

ARTHUR M. CLURE,

Of Counsel,

700 Torrey Building,

Duluth 2, Minnesota.

Court Printing Co., 322 So. 4th St., Minneapolis

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INDEX

Pace

Petition for Writ of Certiorari 1

Agreement, Appendix 28

Appendix 28

Jurisdiction 5

Limitation Order, W. P. B. Appendix 33

Reason Relied Upon for Issuance of Writ..., 7

Summary and Statement of Case 1

Questions Presented 6

Prayer for Writ 8

Brief in Support of Petition 10

Argument 14

That Circuit Court has decided a question of general importance, etc. 14

That Circuit Court has decided a question of Federal Law, not

settled by this Court, etc <a

That Circuit Court has decided a question of Local Law probably

in conflict with local decisions

Conclusions 27

Opinions of the Court Below 10

Specification of Errors. 11

Summary or Argument 12

Statement of the Case 1. 10

TABLE OF CASES CITED

Aetna Life Insurance Co. v. Haworth, 300 U. S. 227 6

Altvater v. Freeman, 319 U. S. 359 6

Allanwilde Transport Co. v. Vacuum Oil Co., 248 U. S. 377......8, 13, 18, 21, 20

Berg v. Erickson (C. C. A. 8), 234 Fed. 817 7, 8. 12, 13, 14, 17

Carr v. Whitebreast Fuel Co., 88 Iowa 136, 55 N. W. 205. 23, 24

Columbus Railway & Power Company v. Columbus, 249 U. S. 399....8, 13, 18, 27

District Township of Union v. Smith, 39 Iowa 9, 18 Am. Rep. 39....8, 13, 22, 24

Edward Maurer Co., Inc., v. Tubeless Tire Co. (D. C. Ohio), 272 Fed. 990,

aff'd (C. C. A. 6) 285 Fed. 713. 7, 8, 12, 13, 14, 17, 27

Erie Railroad Company v. Thompkins, 304 U. S. 64. 22

Fibrosa Spolka Akeyjna v. Fairbairn L. C. Barbour, Ltd., 167 L. T. N. S.

101, 144 A. L. R. 1298. 7, 12, 14, 21

Forsyth v. Hammond, 166 U. S. 506, 514. 15

Fritzler v. Robinson, 70 Iowa 500, 31 N. W. 61 23

Geipel v. Smith (1872), L. R., 7 Q. B. 404. 21

General Pictures Company v. Electric Company, 304 U. S. 175. 16

Fr ·- EB Bae A EERE

Hess Brothers v. Great Northern Pail Company, 175 Wis. 465,

185 N. W. 542 26

International Harvester Company v. McAdam, 142 Wis. 114, 124 N. W. 1042,

26 L. R. A. €N.S.) 774. 23

Klaxon Company v. Stentor Electric Manufacturing Co, 313 U. S. 487 23

Lauth v. McKenna Steel Working Co., 160 Wis. 309, 151 N. W. 797... 23, 26

Luchenbach S. S. Co. v. W. R. Grace Co., 267 Fed. 676. 27

Mahaska County State Bank v. Brown, 150 Iowa 577,

121 N. W 459 8, 13, 22, 24

Maryland Casualty Co. v. United States, 251 U. S. 342. 19

Metropolitan Water Board v. Dick Kerr, etc. (1917), 2 K. B. 1,

1918 A. C. 119 7, 12, 14, 21

Mutual Benefit Life Insurance Co. v. Henrietta Hillyard, 37 N. J. L. 444. 25

New York Life Ins. Co. v. Stratham, 93 U. S. 24. 8. 13, 18, 25

Ohio Citizens Trust Company v. Airway Elec. App. Corp. (D. C. Ohio),

56 Fed. S. 1010. 8, 12, 13, 14, 15, 17, 22, 27

Otto v. Orange Screen Co. (D.C.D. N. J.), ¥

57 Fed. S. 134. 7, 8, 12, 13, 14, 16, 17, 22, 27

Re Badische Co. (1921), 2 Ch. 231 21

Rhea v. Adder Machine Co., 189 Towa 1085, 178 N. W. 359 ted, 13

Salinger v. General Exchange Ins. Corp., 217 Iowa 560,

250 N. W. 13. 8, 13, 22, 24

Sola Electric Company v. Jefferson Elec. Co., 317 U. S. 173 19

Texas v. Hogarth Shipping Co., 256 U. S. 619 7, 8. 12, 13, 14, 20

The Kronprinzessin Cecile, 244 U. S. 12 7, 12, 14, 21, 27

The Styria v. Morgan, 186 U. S. 1 7, 8, 12, 13, 14, 18, 21

Thompson v. Thompson, 315 III. 521, 146 N. E. 45. md, 1

United States v. Eaton, 144 U. S. 677 18

Wernli v. Collins, 87 Iowa 548, 54 N. W. 365 8, 13, 22

TABLE OF STATUTES AND TEXT BOOKS CI TED

Judicial Code, Section 274 (d) (28 U. S. C. A. 400) 1

Judicial Code, Section 240 (a) (28 U. S. C. A. 347) 6

Public Act 671 (54 Stat. 676), as amended by Act of May 21, 1941 (55 Stat.

236), 50 U. S. C. A. (Appendix), Sec. 1151 18. 19

Second War Powers Act (March 27, 1942), 56 Stat. 177, Public No. 507;

50 U. S. C. A. (Appendix), Sec. 631-645 a 19

Williston, Contracts, Vol. VI, Sec. 1957. 26

Williston, Contracts, Vol. VI, Sec. 1958. 26

Supreme Court of the United States

OCTOBER TERM, 1944

Neate tales ee

ALLEN J. PATCH,

Petitioner and Appellee Below,

VS.

SOLAR CORPORATION,

Respondent and Appellant Below.

PETITION OF ALLEN J. PATCH FOR A WRIT OF

CERTIORARI TO THE CIRCUIT COURT OF

APPEALS FOR THE SEVENTH CIRCUIT.

TO THE HONORABLE HARLAN FISK STONE,

CHIEF JUSTICE OF THE UNITED STATES, AND

THE ASSOCIATE JUSTICES OF THE SUPREME

COURT OF THE UNITED STATES:

Your Petitioner respectfully shows:

I.

SUMMARY AND SHORT STATEMENT OF

THE MATTER INVOLVED

This action was brought by the Petitioner, Allen J.

Patch, by filing his Bill of Complaint on July 31, 1943,

in the District Court of the United States for the Eastern

District of Wisconsin, under Section 274 (d) of the

Judicial Code, as amended (28 U. S. C. A., Section 400),

FFP FELIS ES TO dd TE Ee EN A RT

2

to secure a declaratory judgment that the exclusive

clause of a general license given respondent’s assignor

for the manufacture and sale of a device patented by

Petitioner, had been terminated pursuant to the terms

of the license agreement because of failure to pay the

minimum royalty required thereby, and to procure an

injunction restraining the defendant from thereafter

claiming to be the holder of such an exclusive license,

and to restrain it from selling under such exclusive

license (R. p. 2).

The District Court (Judge F. Ryan Duffy) held that

the Plaintiff was entitled to the relief prayed for and

entered its injunction and restraining order as prayed

for (R. p. 44).

The Circuit Court of Appeals for the Seventh Circuit

(Opinion by Judge Minton), reversed the District Court |

and directed it to enter judgment sustaining the motion

of the Defendant for judgment on its counterclaim and

to decree that the exclusive feature of the license agree-

ment was in the defendant, subject only to the continued

payment of royalties after restrictions on the manufac-

ture of laundry equipment were lifted sufficiently to per-

mit the renewal of its manufacture, and to enjoin the

Petitioner from selling, leasing, conveying or offering to

sell any right or interest to others under the patent

which might in any way conflict with the enjoyment by

the Defendant of its exclusive license (R. p. 62).

The Petitioner, an inventor, and a resident and citizen

of the State of Wisconsin, holds United States Patent

No. 1,964,440, issued June 26, 1934, which patent covers

what is known as a “link” power transmission, which is

used in the manufacture of washing machines (R. pp. 5,

41). On June 19, 1937, he entered into a written agree-

a 2. S 2 i —

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ment! with Beam Manufacturing Company (hereafter

for brevity termed Beam“), granting Beam a general

license to manufacture and sell machines employing this

device generally throughout the world, and in the same

agreement granted Beam an “exclusive license” for

manufacture and sale of said transmissions “to chain

stores, mail order and rubber tire companies” (R. p. 5).

The action here involves only this exclusive license

created by the agreement. The agreement! provides,

among other things, that should Beam not pay during

any calendar year commencing on or after January 1,

1941, a total royalty of $5,000.00 to him, then the Peti-

tioner-Licensor, would have the right to cancel the

exclusive feature of the license (R. p. 6).

The agreement is to extend for the life of the patent,

unless terminated. The licensee, Beam, and its assignee,

Solar Corporation, has the right to terminate the ex-

clusive feature of the license on a sixty days’ written

notice (R. p. 6). The license agreement was executed in

the State of Iowa by both parties on June 19, 1937. At

that time the Petitioner was engaged with Barlow and

Seelig Company in certain litigation in the State of Wis-

consin, involving title to the patent. In that litigation,

Beam advanced some $3,000.00 as expenses for the pur-

pose of conducting such litigation (R. p. 31). This was

later repaid out of royalty checks due to the licensor

(R. p. 31), and the litigation terminated in licensor’s

favor by the Supreme Court of the State of Wisconsin.?

In 1938 Beam began to manufacture and sell the

machines using the patented device, generally to the

trade (R. p. 31), and continued to do so until May 15,

—

1See Appendix, p. 28, for copy of license agreement.

2Barlow & Seelig Mfg. Co. v. Patch, 232 Wis. 220, 286 N. W. 577.

1 SORE

4

1942, which was the effective date of Limitation Order L,

issued by the War Production Board- (R. p. 34). This

order bears the erroneous date March 12, 1943, but was

actually issued March 12, 1942 (R. p. 32). This order

prohibited after the 15th day of May, 1942, the manu-

facture of washing machines in the United States, with

certain exceptions, not herein material (R. p. 43). Be-

tween January 1, 1942, and May 15, 1942, Beam manu-

factured 19,510 machines, according to its own account,

and it paid Petitioner $3,902.40 as royalty at the rate of

20c per machine as called for by the exclusive feature

of the license (R. p. 43). Nothing was paid after that

date until October, 1944, when certain machines, which

are not considered here material, were made for the

Marine Corps of the United States Navy by Solar Cor-

poration, the respondent, as these machines were manu-

factured after the entry of the judgment in the District

Court of the Eastern District cr Wisconsin.

Because of its failure to pay the full sum of $5,000.00

called for by the exclusive feature of the license agree-

ment during the calendar year 1942, Petitioner on March

29, 1943, served upon Beam, under the terms of the

license agreement, and in compliance with it, a notice

of intention to terminate the exclusive feature of the

license agreement upon the ground and for the reason

that Beam had not paid in the calendar year 1942 the

sum of $5,000.00 called for by the agreement (R. p. 43).

Beam wrote Petitioner stating that it refused to accept

the notice of cancellation and that any attempt by Peti-

ioner to grant any other license would be regarded as a

breach of the contract, and that such licensee would be

regarded by it as an infringer of Beam’s exclusive rights.

It did not pay or offer to pay the difference in the mini-

8See Appendix, page 34.

77777 d a a er HAR ME: LSPA TONE SENATE

11

5

mum royalty of $5,000.00 due under the contract for the

calendar year 1942, and the sum of $3,902.40 paid up to

May 15, 1942 (R. pp. 19, 20). During the year 1943, prior

to the commencement of this action, Beam assigned all

its rights in the license agreement to the respondent,

Solar Corporation, which became entitled to all the

rights and subject to all the obligations of the agreement

(R. pp. 2, 3, 10, 42).

On June 21, 1943, Petitioner entered into an agreement

with the Zenith Machine Company, a corporation in

Duluth, Minnesota, granting it a non-exclusive license to

make and sell the “link” transmissions under the patent

(R. p. 26).

The decision of the District Court of the Eastern Dis-

trict of Wisconsin, in favor of Petitioner, was filed on

August 14, 1944, and the Court made and filed its Find-

ings of Fact on September 18, 1944 (R. p. 41). Notice of

Appeal was filed by the Respondent on December 18,

1944, appealing the case to the Circuit Court of Appeals

for the Seventh Circuit, and its opinion and judgment

was filed on May 29, 1945 (R. pp. 56 and 62). The Peti-

tioner then made a Petition for Rehearing and this Peti-

tion was denied by the Circuit Court of Appeals on June

22, 1945 (R. pp. 62, 63).

II.

JURISDICTION

(1) This is a suit under the Federal Declaratory

Judgments Act, Judicial Code, Section 247 (d), as

amended (28 U. S. C. A., § 400).

(2) The date of the decree to be reviewed is May 29,

1945 (R. p. 62). The Petition for Rehearing was timely

filed and denied on June 22, 1945 (R. p. 63).

LOTR TER BAER RAPTOR LIN PE HE

6

(3) The statutory provision which is believed to

sustain the jurisdiction of this Court is Section 240 (a)

of the Judicial Code, as amended by the Act of February

13, 1925 (28 U. S. C. A., § 347).

(4) This is an action brought under the Federal

Declaratory Judgments Act by a citizen of Wisconsin,

against a corporation domiciled in the State of Delaware,

and to determine their respective rights under a license

for the use of a patent. The District Court of the Eastern

District of Wisconsin granted Petitioner the relief

prayed for (R. p. 44). The Circuit Court of Appeals, for

the Seventh Circuit, reversed and ordered judgment for

the Respondent as prayed for by it (R. p. 62).

(5) The cases believed to sustain said jurisdiction

are as follows:

Altvater v. Freeman, 319 U. S. 359;

Aetna Life Insurance Company v. Haworth, 300

U. S. 227.

III.

QUESTIONS PRESENTED

(1) Whether the order of the War Production Board

limiting the manufacture and sale of laundry equipment,

using a patented device, brought about a temporary

frustration of the exclusive license.

(2) Whether the order of the War Production Board

limiting the manufacture and sale of washing machines,

brought about a temporary failure of consideration for

the Respondent’s promise to pay to Petitioner $5,000.00

minimum royalty annually.

(3) Whether the effect of the application of the doc-

trine of failure of consideration or commercial frustra-

tion is to terminate the agreement or merely suspend it

CCC ˙ 000000000

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during the period the limitations of the War Production

Board order are in effect.

(4) Whether the minimum yearly consideration, pay-

able by the Respondent to the Petitioner, for the reten-

tion of the exclusive feature of the license was divisible

so as to permit Respondent to retain such exclusive

license, without payment of the full consideration there-

for.

IV.

REASONS RELIED UPON FOR THE

ALLOWANCE OF THE WRIT

(1) That the Circuit Court of Appeals, for the

Seventh Circuit, has decided a question of general impor-

tance contrary to the decisions of this Court, and to the

weight of authority in holding that the application of the

doctrine of frustration suspended the performance of the

contract and cancelled the right of licensor to terminate

the exclusive license upon failure of licensee to pay the

minimum royalty, and in holding that the suspension

created only a temporary impossibility of performance

contrary to the decisions of this Court, in the cases of:

The Kronprinzessin Cecile, 244 U.S.12; Texas v. Hogarth

Shipping Company, 256 U. S. 619; The Styria v. Morgan,

186 U. S. 1, and to the general rule applied in other juris-

dictions, Thompson v. Thompson, 315 Illinois 521, 146

N. E. 45; Metropolitan Water Board v. Dick Kerr, etc.,

2 K. B. 1, affirmed 1918, A. C. 119.

Fibrosa Spolka Akeyjna v. Fairbairn L. C. Barbour,

Limited, 167 L. T. N. S. 101, 144 A. L. R. 1298 (H. of L.);

Berg v. Erickson (C. C. A. 8), 234 Fed. 617; Edward

Maurer Company, Inc., v. Tubeless Tire Company (D. C.

Ohio), 272 Fed. 990, affirmed (C. C. A. 6), 285 Fed. 713;

Otto v. Orange Screen Co. (D. C. D. N. J.), 57 Fed. S. 134;

Ohio Citizens Trust Company v. Airway Electric Ap-

pliance Corporation (D. C. Ohio), 56 Fed. S. 1010.

(2) The Circuit Court of Appeals, for the Seventh

Circuit, in holding that the exclusive license in the case

at bar was suspended and the right of cancellation frus-

trated by the Limitation Order of the War Production

Board has decided an important question of Federal

Law, which has not been but should be settled by this

Court because a different principle has been applied in

the cases of Berg v. Erickson (C. C. A. 8th), 234 Fed.

817; Maurer v. Tubeless Tire Company (C. C. A. 4th),

285 Fed. 713; Otto v. Orange Screen Co. (D.C.D. N.J.),

57 Fed. S. 134; Ohio Citizens Trust Company v. Airway

Electric Appliance Corporation (D. C. Ohio), 56 Fed. S.

1010, and in a way probably in conflict with the prin-

ciples announced in the decisions of this Court in the

cases of Allanwilde Transport Co. v. Vacuum Oil Co.,

248 U. S. 377; The Styria v. Morgan, 186 U. S. 1; New

York Life Ins. Co. v. Strathain, 93 U. S. 24; Texas Co. v.

Hogarth Shipping Co., 256 U. S. 619; Columbus Railway

& Power Company v. Columbus, 249 U. S. 399.

(3) That the Circuit Court of Appeals for the

Seventh Circuit, has decided an important question of

local law in a way probably in conflict with the ap-

plicable local decisions. Wernli v. Collins, 87 Iowa 548,

54 N. W. 365; District Township of Union v. Smith, 39

Towa 9, 18 Am. Rep. 39; Mahaska County State Bank v.

Brown, 159 Iowa 577, 121 N. W. 459; Rhea v. Adder

Machine Co., 189 Iowa 1085, 178 N. W. 359; Salinger v.

General Exchange Ins. Corp., 217 Iowa 560, 250 N. W. 13.

Wherefore, Your Petitioner prays that the writ of

Certiorari issue under the Seal of this Court, directed

to the United States Circuit Court of Appeals, for the

Seventh Circuit, demanding said Court to certify and

send to this Court on a date to be designated, the full

and complete transcript of the record, and of the pro-

ceedings of said Circuit Court of Appeals, for the

Seventh Circuit, had in the case, numbered and entitled

on its docket No. 8754, Allen J. Patch, Plaintiff-Appellee,

vs. Solar Corporation, Defendant-Appellant, to the end

that this cause may be reviewed and determined by this

Court, as provided by the Statutes of the United States,

and that the judgment herein of said Circuit Court of

Appeals of the Seventh Circuit be reversed by this Court,

and for such other and further relief as may be proper.

Dated July 27th, 1945.

JAMES G. NYE,

Attorney for Petitioner,

Alworth Building,

Duluth 2, Minnesota.

T. M. McCABE,

ARTHUR M. CLURE,

700 Torrey Building,

Duluth 2, Minnesota,

Of Counsel.