# Petitioners Brief — Patch v. Solar Corp. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386416_0260%3A2 ## Record - **Collection:** Supreme Court brief - **Document type:** Petitioners Brief - **Published:** January 1, 1945 - **Citation:** 326 U.S. 741 ## Text 10 Supreme Court of the United States OCTOBER TERM, 1944 3 Tapped acest ALLEN J. PATCH, Petitioner and Appellee Below, vs. SOLAR CORPORATION, Respondent and Appellant Below. BRIEF IN SUPPORT OF PETITION I. OPINIONS OF THE COURT BELOW The opinion of the District Court of the Eastern Dis- trict of Wisconsin has not yet been reported, and is printed at R. p. 38. Findings of Fact, Conclusions of Law appear at R. p. 41. The decree entered in the District Court is printed at R. p. 44. The opinion of the Circuit Court of Appeals for the Seventh Circuit appears at R. p. 56 and has not been reported. The order denying the Petition for Rehearing made by the Circuit Court of Appeals appears R. p. 63. No opinion was filed at that time. II. STATEMENT OF THE CASE This case has been stated in the preceding Petition under paragraph I which is hereby adopted and made a part of this brief. 11 III. SPECIFICATION OF ERRORS The errors which Petitioner will urge if the Writ of Certiorari is allowed, are that the Circuit Court of Appeals for the Seventh Circuit erred: 1. In holding that the Limitation Order of the War Production Board limiting the manufacture of laundry equipment, in legal effect suspended the exclusive license and the right of Plaintiff to the minimum royalties pro- vided by that agreement, while the Order remained in effect. 2. In holding that the ‘imitation order of the War Production Board limiting the manufacture of laundry equipment frustrated the part of the agreement of the parties providing for cancellation of the exclusive license upon failure to pay a certain minimum sum during a calendar year. 3. In holding that the Plaintiff was not entitled to judgment as decreed by the District Court of the United States for the Eastern District of Wisconsin. 4. In holding that the Respondent is entitled to a judgment and decree that it is the owner of an exclusive right to make and sell Petitioner’s patent device to chain store, mail order and rubber tire companies, as prayed for in its Answer and Counterclaim. 5. In holding that the service of the notice of can- cellation for failure to pay the minimum stipulated royalty upon the nonpayment thereof by the Respondent amounted to a forfeiture, which should be relieved against by permitting the Respondent to retain the ex- clusive license without payment of the agreed considera- tion. RIGS ee > PRGA NS Ee Or EE FO — 6. In reversing the judgment of the District Court of the Eastern District of Wisconsin. IV. SUMMARY OF THE ARGUMENT 1. That the Circuit Court of Appeals for the Seventh Circuit, has decided a question of general importance contrary to the decisions of this Court and to the weight of authority, in holding that the application of the doc- trine 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 dtyria v. Morgan, 186 U. S. 1, and to the general applied in other jurisdictions, 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. 11% 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. 817; 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 Appliance Corporation (D. C. Ohio), 56 Fed. S. 1010. 2. The Circuit Court of Appeals, for the Seventh Cir- cuit, 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 13 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. Stratham, 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 applicable local decisions. Wernli v. Collins, 87 Iowa 548, 54 N. W. 365; District Township of Union v. Smith, 39 Iowa 9, 18 Am. Rep. 39; Mahaska County State Bank v. Brown, 159 3 Iowa 577, 121 N. W. 459; Rhea v. Adder Machine Co., 1289 Iowa 1085, 178 N. W. 359; Salinger v. General Ex- change Ins. Corp., 217 Iowa 560, 250 N. W. 13. PPUFUEUEU Ew ↄ ù ͤ ꝰ²! o ME A I PEF IPE RENO ELEY ROR Bo MEL Se RII RR 14 V. ARGUMENT 1. THAT THE CIRCUIT COURT OF APPEALS FOR THE SEVENTH CIRCUIT, HAS DECIDED A QUESTION OF GENERAL IMPORTANCE CON- TRARY 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 jurisdictions, 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. 817; 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. 134, Ohio Citi- zens Trust Company v. Airway Electric Appliance Cor- poration (D. C. Ohio), 56 Fed. 1010. Exceptional circumstances, peculiarly affecting the public and the state of general law are sometimes deemed sufficient to warrant the granting of a Writ of Certiorari BEET TELE EER LE LEA PEN Cat tA SPOILERS * a —— 15 to examine the soundness of a decision of the Circuit Court of Appeals, even in the absence of a conflicting decision on the same matter in another Circuit. Such cir- cumstances are not restricted to those arising from facts of any particular character; the reason is that it is in the interest of the law and the need of “securing harmony of decision and the appropriate settlement of questions of general importance, so that the system of Federal jus- tice may be appropriately administered,” to use the language then Chief Justice Hughes employed in an address.“ The power of this Court is “co-extensive with all the possibilities,” Forsyth v. Hammond, 166 U. S. 506, 514. In the case at bar no question of the title to, or validity of, the patent is at issue. The real problem is the ques- tion of the effect of the emergency orders of a Federal agency issued pursuant to an Act of Congress, upon a private contract. The Case at bar presents a situation remarkably free of other issues, and squarely poses the question as to the effects of the orders of the War Production Board under the emergency Acts of Congress upon a contract. It is apparent that the rule adopted by the Circuit Court of Appeals of the Seventh Circuit would be held to apply to all contracts irrespective of their nature. An examina- tion of the authority cited by that Court in support of its position indicates chat by its decision, the Circuit Court of Appeals has adopted a general rule of law effecting all types of contracts in a field marked by con- fusion and contrary to the ruling in two other Federal Courts. District Judge Kloeb of Ohio states in his deci- sion in Ohio Citizens Trust Company v. Airway Electric Appliance Corporation, 56 Fed. 1010, at page 1017: «See 48 Harvard Law Review 262. 7 77727 ³¹i ] Ü³Ü—Ü ſ m ꝗ]ꝗ ꝶ t,“ 8 16 “The doctrine of the dissolution of a contract by reason of the frustration of its commercial object arose in England, and was adopted to some extent in this country. The authorities, however, appear to be in a state of hopeless confusion both here and in England in the application of the rule.” And in the case the District Court refused to apply the rule adopted by the Circuit Court of Appeals to a situa- tion which is practically identical to that in the case at bar. The same point was before the Court in the case of Otto v. Orange Screen Company decided in the District Court of New Jersey, and that Court decided as did the New Jersey Court. Otto v. Orange Screen Company, 57 Fed. S. 134, 140. The application of the doctrine of frus- tration has been urged in a great variety of cases noted in 137 A. L. R. 1199 and subsequent notes, The extent of commerce is widespread, of which the subject matter is the use of a patented article, and license agreements con- cerning their use affect a great portion of the common articles of trade and gommerce, as was observed by Justice Black in his dissent in the case of General Pic- tures Company v. Electric Company, 304 U. S. 175, 186. Since such license agreements are very common and numerous, the question of the extension of the doctrine of frustration to them, altering their terms and their effect, as is done by the Circuit Court of Appeals in its decision below, presents a question of the greatest im- portance in the commercial world, and one peculiarly the subject of litigation in Federal Courts because of the nature of the matter involved. And not only are license agreements altered, by the decision below, but the whole field of contract law is affected because there are a multitude of agreements, which have in some manner, been affected by the impact BE EERE ELE LONI IE NN, r WER e 17 of war and the necessary governmental regulation there- by caused. The importance of this litigation from a public viewpoint and its general effect has been admitted by the Respondent in its Brief filed in the District Court below. In this Brief it states: “It seems inevitable, however, that there will be much similar litigation in the not distant future. For that reason the final decision in this action may well have far-reaching influence.” We urge, therefore, that the problem presented is one of general importance in the field of law and of concern to the commercial interests of the country as a whole and to the bar generally, and that these conditions and the necessity of a final determination of the application of the principles announced by the Circuit Court of Ap- peals in its decision below earnestly press—with con- vincing cogency it is believed—for the granting of the Writ in the case at bar. 2. THE CIRCUIT COURT OF APPEALS, FOR THE „ SEVENTH CIRCUIT, IN HOLDING THAT THE Ex- CLUSIVE LICENSE IN THE CASE AT BAR WAS SUSPENDED AND THE RIGHT OF CANCELLATION FRUSTRATED 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 PRIN- CIPLE 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 Ap- pliance Corporation (D. C. Ohio), 56 Fed. S. 1010, and in 18 a way probably it conflicts with the principles 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. Stratham, 93 U. S. 24; Texas Co. v. Hogarth Shipping Co., 256 U. S. 619; Columbus Railway & Power Com- pany v. Columbus, 249 U. S. 399. The authority of the War Production Board to issue the limitation order regulating the manufacture of laundry equipment by imposing preferences and limita- tions upon the procurement of materials, has its basis in the Act of Congress of June 28, 1940 (Public Act 671, 54 Stat. 676), as amended by the Act of May 21, 1914 (Chapter 157, 55 Stat. 236), 50 U. S. C. A. Appendix, Section 1151, et seq., and in the Executive Orders of the President issued subsequent thereto, delegating the authority so vested in him to that Board. Pursuant to such authority the War Production Board has issued limitation orders affecting almost the entire field of materials employed in the construction of goods, war and civilian, including automobiles, trucks, radia- tors, refrigerators, office furniture and equipment, vacuum cleaners, tractors, farm machinery, sewing machines, and many others, to mention just a few of the great field covered by these orders.’ Because many machines employ a patented device, the use of which is secured by means of a license, there is presented in the case at bar a problem, the solution of which has far-reaching effects. The regulations and orders issued by W. P. B. and other Federal Agencies naturally are designed to have and do have effect throughout the entire United States, and have the force of a federal law or statute, United States v. Eaton, 144 5See W. P. B., Products and Priorities.” May, 1945. RAB PE RER, SERRE PL PAE RY bh et NOSE SCI MRR BERTIE OE NEI RENEE RES TOYA ARR EEN NI OS e 19 U. S. 677, Maryland Casualty Company v. United States, 251 U. S. 342, 349. The situation presented in the case at bar is one which arises in the area of “judicial decision within which the policy of the law is so dominated by the sweep of Federal Statutes, that legal relations which they affect must be deemed governed by the Federal Law having its source in those Statutes, rather than by local law.” Sola Electric Company v. Jefferson Electric Company, 317 U. S. 173. ° The source of the Federal power in the case at bar is Chapter 157, 55 Stat. 236, approved May 31, 1941, 50 U. S. Code App., Sec. 1152, which amended Section 2 (A) of the Act approved June 28, 1940, Chapter 440, 54 Stat. 676. The 1940 Act authorized the establishment of priori- ties in deliveries upon contract with the Secretary of the Navy during the National Emergency declared by the President, The 1941 Act broadened the powers and pro- vided that whenever the President is satisfied that the fulfillment of requirements for the defense of the United States will result in a shortage in the supply of any material * * * for defense or for private account or for export, the President may allocate such material * * “.“ And further provided: “The President may exercise any power, author- ity or discretion conferred on him by this section through such Department, agency or officer of the government as he may direct, and in conformity with any rules and regulations which he may pre- scribe.” The Act of 1940 was amended on March 27, 1942, in the Second War Powers Act (56 Stat. 177) to cover shortages of “Any facilities for defense,” as well as “material,” and the powers of the President to investi- gate shortages were broadened and defined in detail. On August 28, 1941, by executive order the President authorized the Office of Production Management to per- form the functions of the allocations of material; and later, by executive order transferred these functions from the Office of Production Management to the War Production Board. Certainly, the impact of the order of the War Pro- duction Board limiting the manufacture of laundry equipment, or any other product limited by its orders, should have the same effect upon a license agreement between the parties to that agreement, whether the agree- ment is made in one State or the other, or is performed in one State or the other. The practical question for solu- tion is not the status or meaning of the terms of the par- ticular license agreement under the local law, but of the effect of the Federal Regulation upon the terms of the agreement, by implication or otherwise. If the effect of the limitation order upon the license agreement in this case was to impose by implication “a condition excusing both parties from performance,” and to suspend the operation of the cancellation claus*, as was held by the Circuit Court of Appeals, then all such agreements and all types of contracts, wherever made and wherever per- formed in the United States, whose performance was interfered with by a similar governmental order or regu- lation, must of necessity have a similar clause ingrafted into them by the operation of Federal Law. These facts, we respectfully urge, present a Federal question, of gen- eral importance. In Texas Co. v. Hogarth Shipping Company, 256 U. S. 619, this Court held that a shipping contract was dis- solved in its entirety, by the act of a government in sequestering a vessel, and that both parties were ex- cused from further performance of the contract. The TO ees treet Ge Ng RR ff RETR! ILE YS 21 Circuit Court of Appeals in its decision below cites from that case and states that it illustrates the rule applicable to the case at bar, but in its decision the cancellation clause in the contract was frustrated and that perform- ance by defendant was suspended. The principle an- nounced in the Hogarth case finds support in the cases of Allanwilde Transport Co. v. Vacuum Oil Co., 249 U. S. 377, and The Kronprinzessin Cecile, 244 U. S. 12. The Circuit Court of Appeals holds that this extension of the contract, or suspension, is the result of an implied condition in the contract. To the contrary, this Court has cited with approval the doctrine of Geipel v. Smith (1872), L. R. 7 Q. B. 404, to the effect that a state of war interfering with a shipping contract under orders issued must be presumed to be likely to continue so long as to destroy and defeat a commercial venture, in The Styria v. Morgan, 186 U. S. 117. The doctrine considered applicable by the Court be- low had its origin in England in the so-called Coronation Cases, but in England, orders similar to such as are here involved are held to end the contract and not to merely suspend it. Metropolitan Water Board v. Dick Kerr & Co., 1917 2 K. B. 1, 1918 A. C. 119. The rule approved in England is that a state of war must be presumed to be likely to continue so long and to disturb the commerce of merchants so as to defeat and destroy the objects of a commercial venture, Fibrosa Spolka Akeyjna v. Fairbairn L. S. Barbour, Ltd. (H. of L.), 167 L. T. N. S. 101, 144, A. L. R. 1298. The English rule holds that the implied term must not be inconsistent with an express term of the contract itself, Re Badische Company, 1921 2 Ch. 231. With this authority the District Courts of Ohio and New Jersey agree, and to hold contrary to the Circuit Court of Ap- peals in its decision below. Otto v. Orange, supra, and Ohio Citizens Trust Company v. Airways Company, supra. With this diversity of opinion upon a question of fed- eral law, it would be of public benefit, of assistance to the commercial world, and to the bar of the country as a whole, if a final decision on the merits of the question could be had from this Court. III. THAT THE CIRCUIT COURT OF APPEALS FOR THE SEVENTH CIRCUIT HAS DECIDED AN IMPOR- TANT QUESTION OF LOCAL LAV IN A WAY PROB- ABLY IN CONFLICT WITH APPLICABLE LOCAL DECISIONS. Wernli v. Collins, 87 Iowa 548, 54 N. W. 365; District Township of Union v. Smith, 39 Iowa 9, 18 Am. Rep. 39; Mahaska County State Bank v. Brown, 159 Iowa 577, 585, 121 N. W. 459, 462; Salinger v. Gen- eral Exchange Ins. Corp., 217 Iowa 560, 250 N. W. 13. The license agreement in the case at bar was executed in the State of Iowa and at that time the Beam Company manufactured the machines in which the patented device was used in that State (R. p. 30). Thereafter, Beam merged with Solar Corporation and that company in- tends to engage in the manufacture of the machines probably at the plant in Iowa (R. p. 30), when the ban on production is lifted and materials are again available. Petitioner performed the contract by granting the license in Iowa (R. pp. 42, 5). Should this Court be of the opinion that the question in this case is one to which the rule of Erie Railroad Company v. Thompkins, 304 U. S. 64, applies, then the local law governing the question is the law which would be applied under the doctrine of the conflict of law rules by the Wisconsin Court, Klaxon 5 1 23 Company v. Stentor Electric Manufacturing Company, 313 U. S. 487, 496, and it was the duty of the Circuit Court to determine the applicable law, not what it ought to be. Under the Wisconsin decisions, the usual rule of con- flict of laws is enforced—that is, the law of a place of making the contract governs as to its validity and inter- pretation, and it will be enforced in the form unless it is contrary to the public policy of the forum. International Harvester Company v. McAdam, 142 Wis. 114, 124 N. W. 1042, 26 L. R. A. (N.S.) 774, 20 Anno. Cases 614. An agreement to pay a royalty for the use of a patent by license agreement is enforced in Wisconsin, Lauth v. McKenna Steel Working Company, 160 Wis. 309, 151 N. W. 797. Consequently, whether the law of the forum is applied, or that of Iowa, the result should be the same. The Circuit Court of Appeals cites two Iowa cases in support of its conclusion in the case at bar, Fritzler v. Robinson, 70 Iowa 500, 31 N. W. 61, and Carr v. White- breast Fuel Co., 88 Iowa 136, 55 N. W. 205. We respect- fully submit that neither of these cases is authority for the propositions announced by the Circuit Court. Fritzler v. Robinson, supra, involved a lease of coal mining lands, the defense in a suit to recover a minimum royalty was that by mutual mistake of fact there was no coal to be mined in the land. The Iowa Court held that the evidence was not sufficient to sustain the claim that a condition for non-payment was intended to be inserted in the lease in the event no coal was found, but held that because there was in fact no coal at all in the land there was a total failure of consideration and there was therefore no contract. Here the District Court found as a fact that the plaintiff had fully performed (R. p. 42). — 24 Could there be here a total failure of consideration mak- ing the contract nudum pactum from its very inception? In Carr v. Whitebreast Fuel Co., supra, the facts are somewhat different, since in that there was not an entire lack of coal to be mined, but the amount was insufficient. The basis of the decision is not frustration, but depends on the construction of the meaning of the terms of the lease involved. Construction is not in the present case, the basis of the decision of the Circuit Court of Appeals below, as is evident from a reading of the opinion. The rule of law in Iowa on the doctrine of impossi- bility of performance is the one generally followed. It is clearly announced in District Township of Union v. Smith, 39 Iowa 9, 18 Am. Rep. 39: “When one binds himself by his solemn agree- ment to do an act he is held liable for its nonper- formance, though it is rendered impossible by events over which he had no control. If performance is ren- dered impossible by the destruction of the subject matter of the contract or by death of the person upon whose life performance depends and the like, the obligor will be discharged, but the law holds that events against which parties could have pro- vided in their agreement, shall never be alleged as an excuse for the nonperformance of obligations into which they have entered.“ This language is approved in the case of Salinger v. General Exchange Ins. Corp., 217 Iowa 560, 250 N. W. 13. The doctrine of impossibility of performance is recog- nized by the Iowa Court in Mahaska County Savings Bank v. Brown, 159 Iowa 577, 585, 121 N. W. 459, 462, where the Court said: “The parties contracted on the basis that the assets of the estate would continue in the hands of the assignee and necessarily there was to be implied therefrom the condition that if these were certainly i Bae eS 3 SEE A RE ee ee eh ER EES SR. RR age eT SRT IMS 2 25 removed therefrom without the fault of either party as by the institution of bankruptcy proceedings, performance would be excused. This was not à con- dition against which the exercise of ordinary pru- dence the parties could be expected to have pro- vided. Ordinarily a contingency which reasonably can be anticipated must be provided for by the terms of the contract, else the impossibility of per- formance resulting therefrom will not excuse either party from carrying out the contract.” From these decisions by the Iowa Court, it is apparent that the ordinary common law rules on impossibility of performance are applied there. No case is found in which that Court has held that this doctrine has the effect of suspending the obligation of a contract to pay a stipu- lated license fee and the right to cancel upon nonper- formance. The Circuit Court below cites the case of Mutual Bene- fit Life Insurance Company v. Henrietta Hillyard, 37 N. J. L. 444, to sustain its position that the contract is suspended. That case involved an insurance policy, the suit on which arose shortly after the Civil War. The New Jersey Court held that the war or rebellion made the transmission of money between citizens of the North and the South illegal, because of the state of war, and that upon the end of the hostilities the insured would have the right to reinstate the policy by payment of the premium due plus interest thereon. The Circuit Court below has misapplied the rule of that case, since in the case at bar the order of the Federal Government did not prevent the payment of money and it was a legal act for the licensee to pay. Further, the contract in the case at bar is not between subjects of belligerent nations. The rule of the Hillyard case is not followed in this Court, New York Life Insurance Company v. Stratham, 93 U. S. 24, decided three years later. 26 The Circuit Court below also cites as authority Hess Bros. v. Great Northern Pail Co., 175 Wis. 465, 468, 185 N. W. 542. The language referred to is obiter dicta, and the decision itself does not in any way conflict with the general rule applicable to a case of the indefinite suspen- sion of the possibility of performance of a commercial contract. The rule applicable in Wisconsin appears in Lauth v. McKenna Steel Working Co., 116 Wis. 309, 151 N. W. 797, where the Wisconsin Court said: “The Plaintiff (licensor) is thereby (by the license granted) deprived of his use of his patent and the defendant has the right to use the device covered by them or keep them off the market. It is a right which the defendant acquired to use or not to use at its pleasure for which it is paying and not for the use of the particular device.” The Court below also cites and relies on 6 Williston, Contracts, Section 1957, p. 5490, where that author deals with “temporary impossibility.” In the next section of the same text, that is, 1958, the author treats of Impos- sibility of uncertain duration” and refers to the case of Allanwilde Transport Co. v. Vacuum Oil Co., 248 U. S. 377, where this Court said, p. 386: “* * * and it is further urged that such embargo was at most but a temporary impediment, and the cargo should have been retgined until the impedi- ment was removed, or ported in a vessel not subject to it. We cannot concur in either contention. The duration was of indéfinite extent. Necessarily, the embargo would be continued as long as the cause of its imposition—that is, the submarine menace—and that, as far as could be inferred, would be for the duration of the war, of which there could be no estimate or reliable speculation. The condition was therefore, so far permanent as naturally and justifiably to determine business judgment and ac- vo N . 7 ene Reer 27 tion depending upon it. The Kronprinzessin Cecile, 244 U. S. 12.” The general rule as applied in Federal Courts appears to be that governmental action because of war will not be held to frustrate a contract. Luchenback S. S. Co. v. W. R. Grace & Co. (C. C. A. 4), 267 Fed. 676; Maurer Co. v. Tubeless Tire Company, 272 Fed. 990; Columbus Rail- way & Power Company v. Columbus, 249 U. S. 399; Otto v. Orange Screen Company, 57 Fed. S. 134; Ohio Citizens Trust Company v. Airways Co., 56 Fed. S. 1010. We submit that whether the matter be treated as one of the effect of a federal rule upon the rights of parties to a contract or as one concerning the applicability of the law of the place of making the contract, the decision below is against the overwhelming weight of authority. CONCLUSION Because of its importance and the general applica- bility of the rule of law announced, in the field of con- tract law, this case is one calling for the exercise by this Court of its supervisory powers by granting a Writ of Certiorari and thereafter reviewing and reversing said decision. Dated July 27th, 1945. JAMES G. NYE, Attorney for Petitioner, Alworth Building, Duluth 2, Minnesota. THOMAS M. McCABE, ARTHUR M. CLURE, Of Counsel, 700 Torrey Building, Duluth, Minnesota. 28 MEMORANDUM OF AGREEMENT This Agreement, made and entered into this 19th day of June, 1937, by and between Beam Manufacturing Company, an Iowa corporation, of Webster City, Iowa, hereinafter referred to as “Licensee,” and Allen J. Patch, of South Bend, Indiana, and Ripon, Wisconsin, herein- after referred to as “Licensor,” Witnesseth; Whereas, Licensor is the owner of United States patent No. 1,964,440, subject to a shop right in the Bar- low & Seelig Company of Ripon, Wisconsin, and of cer- tain ideas for washing machine transmissions, and Licensee desires to avail itself of said patent and ideas and to acquire certain rights thereunder: and whereas this agreement is a culmination of the option agreement of March 4, 1937, signed by Licensor and the extension thereof by Licensee’s letter of April 30, 1937, said option agreement being merged herein without limiting the scope or application of this agreement; Now, Therefore, the parties hereto, each in considera- tion of the covenants and agreements hereinafter con- tained on the part of the other, agree as follows: 1. The transmissions covered by this agreement are the so-called “link” transmission covered by said patent No. 1,964,440 and as used by said Barlow & Seelig Com- pany, and any other modified forms of same or improve- ments thereon, as developed by Licensor, whether cov- ered by patents or otherwise. 2. Subject to the terms and conditions hereof, Licensor grants to Licensee a non-exclusive license to make or to have made, use and sell said transmissions in and throughout the United States of America, its terri- tories and possessions, for sale or use anywhere in the world: and, subject to any shop rights of said Barlow & Seelig Company, Licensor grants to Licensee the sole and exclusive right and license for the manufacture and sale of said transmissions to the chain store, mail order and rubber tire companies. To carry out the intent of this exclusive feature of this license, Licensor agrees to grant no future license during the continuance of this exclusive feature of the present license, except to a 29 manufacturer or manufacturers selling only to inde- pendent jobbers or dealers: and the Licensor further covenants that he will require any such future Licensee to agree that it will not sell devices embodying said transmissions to chain store, mail order or rubber tire companies, in so far as his property rights therein per- mit him to so require. Any dispute as to whether a given sale does nor does not come within the above classifica- tion shall be submitted to an arbitration committee of three members, one to be appointed by the Licensee, one by the Licensor, and the two so selected to choose the third member. If the decision of the arbitration com- mittee be that such future licensee be selling to a chain store, mail order or rubber tire company, then Licensor agrees to institute suit immediately against such future licensee, if the patent laws or the terms of such future license so permit. 3. Unless and until the exclusive feature of this license be terminated as hereinafter provided, Licensee agrees to pay Licensor a royalty of twenty cents (20¢) for each transmission made and sold under this agree- ment. A transmission is understood to consist of the three links next adjacent the oscillator shaft of a wash- ing machine for connecting the oscillator shaft with the pitman of a rotary member. On and after July 1, 1939, by sixty (60) days written notice to Licensor, Licensee shall have the right to surrender the exclusive feature of this license to the chain store, mail order and rubber tire companies, in which event the license shall revert to a non-exclusive basis and the royalty for any said trans- missions sold after the expiration of said sixty days shall be fifteen cents (15¢) per transmission, or not higher than the royalty due to Licensor from any other than non-exclusive licensee other than Barlow & Seelig Company. 4. If, during the calendar year 1939, Licensee do not pay Licensor a total royalty of at least Twenty Five Hundred Dollars ($2500.00), then Licensor, upon sixty (60) days notice in writing to Licensee, shall have the right to cancel the exclusive feature of this license with 30 respect to the chain store, mail order and rubber tire companies; and similarly on and after January 1, 1941, Licensor may terminate the exclusive feature of this license if Licensee shall not have paid Licensor a total royalty, in any calendar year immediately preceding the giving of such notice, of at least Five Thousand Dollars ($5,000.00) but Licensee shall not be thereby relieved from liability to pay the royalty accrued and unpaid at the twenty-cent (20¢) rate prior to the giving of said notice. 5. Licensor covenants that he is the owner of said patent No. 1,964,440 issued in his name on June 26, 1934, and in the event of any litigation in regard to the owner- ship or validity of said patent or of any other patent or patent applications for Licensee’s modifications of said link transmission, Licensor agrees to hold Licensee harmless from judgment damages and defense expenses so far as he is able. In the event of any such suit against Licensee, any and all royalties due to Licensor may be withheld by Licensee pending the outcome of such litiga- tion and if such litigation be concluded in favor of Licensor, said royalties shall be immediately reinstated, and the amount of royalties withheld shall immediately be turned over to Licensor less whatever reasonable and proper expense the Licensee may have been put to in connection with such suit. 6. Licensee shall keep accurate books of account of its manufacture and sale of said transmissions, and shall make the Licensor true statements thereof, duly attested before a notary public, not less frequently than after the end of each and every quarter and within fifteen (15) days thereafter, it being understood that the quarters end on the 31st day of March, the 30th day of June and September, and the 31st day of December, of each and every year, and shall mail to Licensor a check payable at face value in lawful money of the United States, for the royalty due as shown by said statement. Said state- ments and checks shall be mailed to Licensor at his last known address. Licensor shall be entitled to have an audit made of the books of Licensee upon which said N — 31 statements are based, during usual business hours and at reasonable intervals. In preparing such statements, Licensee shall be entitled to take credit for royalties previously paid on returned merchandise and merchan- dise wherefor Licensee has been unable to secure pay- ment because of bankruptcy of the purchaser. 7. It shall be the duty of Licensor primarily to prosecute and to pay the expenses of prosecuting any and all infringers of any patent to which this agreement relates. If during the life of this agreement Licensee shall call upon Licensor, while the said exclusive feature hereof be still in effect, to prosecute any such infringer and Licensor shall fail for ninety (90) days so to do, Licensee may proceed against such infringer in the name of the Licensor, and shall have the right to deduct the necessary and reasonable expenses of such litigation from the royalties accruing to Licensor hereunder. Any recovery over and above the bona fide expenses of such suit shall be divided one-half (%) to Licensor and one- half (44) to Licensee. 8. Licensee agrees to work with Licensor to provide transmissions for other licensees as much as its facilities within its plant, or without, will permit, and so long as in its judgment it will not be jeopardizing its own de- liveries or facilities. 9. Licensor agrees to render reasonable assistance to Licensee in preparing equipment to produce said trans- missions, either in its own plant or other plants. 10. Licensee agrees that it will mark said transmis- sions with notice of patent or patents covered by this agreement by showing the patent number thereon, or other marking in accordance with United States patent statutes, and that it will also mark said products with a notice “Patent Applied For” or “Patent Pending,” where proper so to do. 11. Unless sooner terminated in accordance with the provisions hereof, or by mutual consent, this agreement shall remain in force for the life of the patents referred 32 to in Paragraph 1 hereof, unless said transmissions be declared unpatentable, or ownership of said patent structure shall be held to be in others than Licensor by a court of competent jurisdiction from which no appeal has or can be taken. 12. Upon any material breach of this agreement by Licensee, which it is understood shall be a failure to make true statements, or royalty payments thereon, in accordance with paragraph numbered 6 hereof, Licensor on sixty (60) days notice in writing to Licensee shall be entitled to terminate the license herein granted, if dur- ing said period the breach complained of be not remedied, but Licensee shall not thereby be relieved from obliga- tion to pay the royalties due hereunder up to the date of said notice and during the period thereof. 13. This agreement shall be assignable by Licensee to a successor to the entire business and good will of Licensee but shall not be assignable or transferable otherwise by the Licensee, or by operation of law, except on written approval of the Licensor. 14. Except as herein provided, this agreement shall inure to the benefit of and be binding upon the successor or assign of Licensee and the personal representatives, heirs and assigns of Licensor. In Witness Whereof, the parties hereto have affixed their names and seals as of the day and year first above written. Beam Manufacturing Company George P. Castner By G. P. Castner Vice-President and General Manager Allen J. Patch Allen J. Patch State of Iowa, 88. County of Hamilton. On this 19th day of June, 1937, before me personally came George P. Castner, to me known, who, being, by me duly sworn, did depose and say that he is the Vice- — ae 33 President and General Manager of Beam Manufacturing Company, the corporation described in and which exe- cuted the foregoing instrument: that he knows the seal of said corporation; that the seal affixed to said instru- ment is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation and that he signed his name thereto by like order. Elizabeth Kemplay, (Notarial Seal) Notary Public. State of Iowa, 88. County of Hamilton. I, Elizabeth Kemplay, a notary public, within and for the county and state aforesaid, do hereby certify that Allen J. Patch of South Bend, Indiana, and Ripon, Wis- consin, personally known to me and also known to me to be the person whose name is subscribed to the foregoing instrument appeared before me this day in person, and, being by me duly sworn, acknowledged his signing, seal- ing and delivering the said instrument as his free and voluntary act and deed, for the consideration and pur- poses therein set forth. In witness whereof I have set my hand and official seal hereto this 19th day of June, 1937. Elizabeth Kemplay, (Notarial Seal) Notary Public. LIMITATION ORDER OF WAR PRODUCTION BOARD War Production Board Part 922—Laundry Equipment (Limitation Order L-6-c, as Amended March 12, 1943) In accordance with the provisions of § 992.1, General Lmitation Order L-6, which the following order supple- ments, It is hereby ordered, That: § 992.4 Supplementary General Limitation Order L-6-c. 34 (a) Prohibition of production of domestic equipment. (1) Effective April 16, 1942, no Class A or Class B manufacturer shall produce any domestic laundry equipment except upon specific authorization of the Director General for Operations. Effective May 16, 1942, no Class C or Class D manufacturer shall produce any domestic laundry equipment except upon specific authorization of the Director General for Operations. (2) The Director General for Operations may from time to time specifically authorize one or more manu- facturers of any class or combination of classes to pro- duce specified quantities of domestic laundry equipment. (b) Restrictions until dates of prohibition of pro- duction, (1) During the period beginning March 16, 1942, and ending April 15, 1942, inclusive: (i) No Class A manufacturer shall produce more do- mestic laundry equipment than the greater of the fol- lowing two limits: (a) 11,700 units of such equipment, or (b) 90% of the monthly average of his factory sales of such equipment for the twelve months ending June 30, 1941. (ii) No Class B manufacturer shall produce more domestic laundry equipment than the greater of the fol- lowing two limits: (a) 5,625 units of such equipment, or (b) 97½ % of the monthly average of his factory sales of such equipment for the twelve months ending June 30, 1941. (2) During the period beginning March 16, 1942, and ending May 15, 1942: (i) No Class C manufacturer shall produce more do- mestic laundry equipment than the greater of the follow- ing two limits: (a) 3,420 units of such equipment, or — 35 (b) Two times 112½ % of the monthly average of factory sales of such equipment for the 12 months end- ing June 30, 1941. (ii) No Class D manufacturer shall produce more than two times 142½ % of the monthly average of his factory sales of such equipment for the twelve months ending June 30, 1941. (c) Replacement parts. Nothing in this order shall be construed to prohibit or limit the production of re- placement parts for domestic laundry equipment. (d) Restrictions on inventory. (1) Until otherwise ordered by the Director General for Operations no manu- facturer shall sell, deliver, or otherwise transfer any part of the inventory of raw materials, semi-processed parts or finished parts which he holds for use in the pro- duction of domestic laundry equipment to any cther per- son, or to any other department, division, or section of his concern not engaged in the production of domestic laundry equipment, except on the following conditions: (i) Raw materials, semi-processed parts, and finished parts may be sold, delivered or otherwise trans- ferred to other manufacturers of domestic laundry equipment for their use in the production of such equip- ment pursuant to the provisions of paragraph (b); (ii) Raw materials, semi-processed parts, and finished parts may be sold, delivered or otherwise trans- ferred in connection with the manufacture and sale of repair and maintenance parts for domestic laundry equipment; (iii) Raw materials, semi-processed parts, and finished parts may be sold, delivered, or otherwise trans- ferred to any person (including any other department, division, or section of a manufacturer's concern not en- gaged in the production of domestic laundry equipment ) who is able to supply a preference rating of A-9 or higher; (iv) Raw materials, semi- processed parts, and finished parts may be sold, delivered, or otherwise trans- Fe Ae de a de ee eee es BR aie ak oe ee Cd ek ~~ 8 36 ferred to the Defense Supplies Corporation or other cor- poration, affiliate, or other form of enterprise under the control of the Reconstruction Finance Corporation: Provided however, That nothing in this paragraph (d) shall be construed to permit any manufacturer to sell, deliver, or otherwise transfer, or any person to purchase, receive delivery of, or otherwise acquire any raw mate- rials, semi-processed parts, or finished parts in contra- vention of the terms of any L or M order including amendments or supplements thereto, or other regulation of the War Production Board, now effective or effective prior to the date of any such sale, delivery, or other transfer. (2) Each manufacturer shall file with the War Pro- duction Board on or before April 1, 1942, an estimate of the inventory of raw materials, by classes of materials, semi-processed parts, and finished parts, which will re- main in his hands pursuant to this paragraph after he has completed his production of domestic laundry equi;- ment pursuant to paragraph (b). (e) No interference with ordnance production. No manufacturer shall divert materials, labor, or equipment from the production of war material to enable him to produce his production quota under paragraph (b) hereof. (f) Prohibition of acquisition of materials. No manu- facturer of domestic laundry equipment shall purchase, receive delivery of, or otherwise acquire any raw mate- rials, semi-processed parts, or finished parts intended for the production of domestic laundry equipment in excess of quantities required to fulfill the production quotas specified in paragraph (b) hereof; no person shall sell, deliver, or otherwise transfer any such raw materials, semi-processed parts, or finished parts except as so per- mitted: Provided however, That deliveries of raw mate- rials, semi-processad parts, or finished parts actually in transit to the manufacturer on the date of issue of this order may be delivered to the manufacturer. 37 (g) contracts. Fulfillment of contracts in violation of this order is prohibited regardless of whether such order is entered into before or after the effective date of this order. No person shall be held liable for damages or penalties for any default under any con- tract or order, which shall result directly or indirectly from his compliance with the terms of this order. (h) Appeal. Any manufacturer who considers that compliance with this order would work an exceptional or unreasonable hardship upon him, or would disrupt or impair a program of conversion to war production may appeal for relief to the Director General for Operations by means of a letter addressed to the Director General for Operations, Ref.: L-6-c, setting forth in such letter all facts pertinent to the appeal. The Director General for Operations may thereupon take such action as he deems appropriate. Issued this 12th day of March, 1943. Curtis E. Calder, Director General for Operations. GPO—War Board 4352—p. 1. --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386416_0260%3A2. Public record. Not legal advice.