# Opposition Brief — De Bothezat Impeller Co. v. American Machine & Metals, Inc.

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 1950
- **Citation:** 339 U.S. 979

## Text

Office-Supreme Court, U. S
FILED

MAY 18 1950

CHARLES ELMORE CROPL

CLER

IN THE

Supreme Court of the United States

October Term, 1949

De Boruezat IMPELLER Company, INo.,
Petitioner,
v.
AMERICAN MacuHINE AND Metats, INc.,

Respondent.

Ee

BRIEF IN OPPOSITION TO PETITION FOR A WRIT
OF CERTIORARI TO THE UNITED STATES COURT
OF APPEALS FOR THE SECOND CIRCUIT

eee ree ee a RR Ee TEN NE

e AupHonsE KEnIson,
Attorney for Respondent.

_ Leonarp P. Moors,
| CHarLEs PICKETT,
of Counsel.

INDEX

PAGE

No Reason Exists to Invoke the Jurisdiction of this
RG imine enesiecel oe aS lt Mio 1
EE SED atk she ncard' Aiienadincan Ghaknactuk a 3
EASES Le ere RRP Tee 3
The Parties’ Situation in 1934 ................ 3
The Contract of April 3, 1934 ................. 4
Metals’ Absolute Right to Terminate .......... 5
The Proceedings Below ...................... 7

Point I—The Contract Plainly Does Not Prevent
Metals, after Termination, from Making Fans

Which Do Not Infringe Valid Patents .......... 9
Point II—The Four ‘‘Defenses’’ Pleaded by Peti-
tioner Were Clearly Insufficient .............. 18
A. The Fear “‘Defenses”® .................. 19
B. The Acts Charged Do Not Affect Metals’
eee 22
C. The Acts Charged Do Not Affect Metals’
Right to Make Fans after Termination .... 27

PE Nea Cain tiie uneec de lasik ackeec oc 29

ere

ii

TABLE OF AUTHORITIES

CasEs:
PAGE*

American Machine and Metals, Ine. v. DeBothezat
Impeller Company, Inc.

ek I GUE A ba VES WA VONS So sheen eeees 3
fe rec ee eeer res Serer 3
Anheuser-Busch Ice & Cold Storage Co., Ine. v.
Reynolds, 221 App. Div. 174, 222 N. Y.S. 650 .... 27
Antisdel v. Chicago Hotel Cabinet Co., 89 Fed. 308
(7 Cir.), modified on rehearing, 90 Fed. 828 ...... 10

Barth v. Addie Co., Inc., 271 N. Y. 31,2 N. E.2d34.. 2
Beck v. Fybern Holding Corp., 238 App. Div. 25, 263

By ie We We Ske AoA Ee Ades Reba s eh came dens ers 25
Biber Bros. News Co., Inc. v. New York Evening Post,
Inc., 144 Misc. 405, 258 N. Y.S. 31 .............02. 24
Bitterman v. Gluck, 256 App. Div. 336, 9 N. Y. S. 2d
BEE Aa Cua ee Cha aes ccahee vee ae Adeeb eteedenrs 25
Bituminous Products Co. v. Headley Good Roads Co.,
2 F. 2d 83, affd. on opinion below, 14 F. 2d 607 (3
Ss ce raise 6 us SAC TASWSR OR SCAR Cab eaaebneies 10
Blain v. Sullivan-Waldron Products Co., 78 F. Supp.
661, affd. on the opinion below, 172 F. 2d 221 (3
GG. hain nicenh obekackomven nes secede hessacasuns 10, 13
Bogy v. Berlage, 265 App. Div. 249, 38 N. Y. S. 2d
25

WE wees vancdasveke snasteseseldsanecaendeeeseaa

Cammack v. Slattery & Bro., Inc., 241 N. Y. 39, 148
15-18, 23

|

* Full citations for Supreme Court cases, and unofficial citations
for New York cases, appear in this table. In the body of the brief,
references are given only to the United States Reports and the official
New York reports except where the case has not been officially

reported in full.

iii

PAGE
Chatham Plan, Inc. v. Clinton Trust Co., 246 App.
Div. 498, 286 N. Y. S. 179, app. dismissed, 272 N. Y.
stteisboientgep garbage ELE 25
Conmar Products Corp. v. Universal Slide Fastener
Co., Inc., 172 F. 2d 150 (2 ORE cotihixeakew st us 11
Crossley v. Dixon, 10 H. L. Cas. 293 ............ 10
Dalzell v. Fahys Watch Case Co., 1388 N. Y. 285, 33
Pe MED NEUEN Eeviorewinie Siscbeigacdec. .. 27
De Cew v. Union Bag & Paper Corp., 57 F. Supp. 388 11
Demeo, Ine. v. Doughnut Mach. Corp., 62 F. 2d 23
(4 Cir.), cert. den. 288 U. §. 605, 53 S. Ct. 396, 77
ERM nahh 2565 ben ew ins genisindicass....., 10
DeMille Co. v. Casey, 121 Misc, 78, 201N. Y.8.20.... 10
Denise v. Swett, 142 N. Y. 602, 37 N. E.627.......... 10
Dueber Watch-Case Mfg. Co. v. Robbins, 75 Fed. 17
MME DLE SH hss chev b dake shcbe didi sci.s., | 10
Dutchess Tool Co. v. Kolb, 44 App. Div. 624, 60 N. Y.
Mee, eins ATVs 0544s ys fohees Se ye ek, 10
Electric Regulator Mfg. Corp. v. American Mechan-
ical Laboratories, Inc., 225 App. Div. 37, 232 N. Y.
EI hace tcccexiiviscy. 10
Eskimo Pie Corp. v. National Ice Cream Co., 26 F.
seg ss on ee Eis 10, 11, 13
Friedman vy. Connecticut General Life Ins. Co., 251
App. Div. 292, 296 N. Y. S. 146, leave to appeal de-
sig a ics a ON 24
Gallo v. Mayor, ete., of New York, 15 App. Div. 61, 44
MN niin yconvavxauretolycaec .. 25
General Motors Corp. v. Rubsam Corp., 65 F. 2d 217
(6 Cir.), cert. den. 290 U. S. 688, 54 S. Ot. 123, 78
an EE a NG ate 10
Goodwin vy. Camp, 295 Fed. 785 a) Rn ee ae 13
Hart v. Hart, 188 App. Div. 283, 176 W. Y. §. 790 . nae. ae

Henderson y. Dougherty, 95 App. Div. 346, 88 N. Y. S,
PM treks vias ntnenssys viebeen bocce.

iv

PAGE
Hirsh & Schofield, Inc. v. Gusmer, 179 App. Div. 347,

165 N. Y. S. 555, affd. without opinion, 226 N. Y.

Se St Acne auwabaenabanns cdbscuwsd odoin 29
Howe v. Atwood, 47 F. Supp. 979 ...............4.. 10
Hyatt v. Ingalls, 124 N. Y. 93, 26 N. BE. 25........ 10, 13, 28
Inglesi v. Hickson, Inc., 195 App. Div. 585, 186 N. Y. S.

Adit HCAS ches bes hays Need veeWs ve Cs bhEewck es 25
International Burr Corp. v. Wood Grinding Service,

pee ee ee ee ree 10
International Life Ins. & Trust Co. v. Franklin Fire

pe Ys ee rae 24
Johnson v. Union Switch & Signal Co., 129 N. Y. 653

CURE GRD, TBs BNE oe visercesdsscevenscncece 12

Jones v. Commercial Travelers’ Mut. Accident Assn.,
201 N. Y. 576, 95 N. E. 1130, modifying 134 App.
Div. 936, 118 N. Y. S. 1146, affirming 114 N. Y. S.
ae eS ay er em Se Pie et ee ee 24, 26
K-W Ignition Co. v. Temco Electric Motor Co., 243
Fed. 588 (6 Cir.), cert. den. 260 U. S. 746, 43 S. Ct.

ee EE a aah ned FeCE ON ene b edu beteens. 13
Lamont, Corliss & Co. v. Bonnie Blend Chocolate

Corp., 135 Misc. 537, 238 N. Y. S. 78 ............. 29
Lipman v. Niagara Fire Ins. Co., 121 N. Y. 454 ...... 23-24
MacDonald Bros., Inc. v. Halston, 63 N. Y. S. 2d 909 24
Mark v. Hyatt, 135 N. Y. 306, 31 N. E. 1099 ........ 10, 28
Marston v. Swett, 82 N. ¥. SOG... 60. cece ccc ccecees 13

Mason v. Electrol, Inc., 292 N. Y. 482, 55 N. E. 2d 747 ~—25
Measurements Corp. v. Ferris Instrument Corp., 159

i ee MD os cabs tdnee oteasbs ndeviabowns 10, 11
Miehle Printing Press & Mfg. Co. v. Publication Corp.,
OR Bie iick bine one baes Weee wie 10, 11

Motion Picture Trade Directory Co., Inc. v. Wallace,
186 N. Y. S. 80, affd. without opinion, 197 App. Div.
SS PT ee eePeT ere erty or er 26

v
PAGE

New York Telephone Co. v. Jamestown Telephone
Corp., 282 N. Y. 365, 26 N. E. 2d 295 .............. 16, 22

ETD S55c's cK cS wih Sus dons onc ccues 10
Okst v. Metropolitan Life Ins. Co., 50 N. Y. S. 2a 919° 24
Paine & Williams Co. v. Baldwin Rubber Co., 113 F.

II Ah ng nos Sh cones eacsS eke lt 10
Pelham v. Edelmeyer, 15 Fed. 262 (C.C.S.D.N.Y.) 10

Corp., 136 F. 2d 210 (2 Cir.) .................... 11

cert. den. 317 U.S. 651, 63 S. Ct. 46,87 L. Ed.524.. 11

Pitts v. Jameson, 15 Barb. 310 ..................... 27
Randall v. Michelin Tire Co., 137 Misc. 570, 244 N. Y.

0 SESS SO ee 25
Redges v. Mulliner, 10 R. P.C.21.................. 10
Redican v. Interchangeable Magnetic Sign Co., Inc.,

162 App. Div. 803, 146 N. Y.S.596 ............... 29

Robertson v. Charles Frohman, Inc., 198 App. Div.
782, 191 N. Y. S. 55, app. dismissed, 233 N. Y. 530,

I linn Sitch dS onlhicnnn ss... 25
Rosenthal Paper Co. v. National Folding Box & Paper
Co., 226 N. Y. 313, 132 N. E.766.............._. 27

Saltus v. Belford Co., 133 N. Y. 499, 31 N. E. 518. .10, 13, 28
Schalkenbach v. National Ventilating Co., 129 App.
yore, anaes Ce a 10, 13
Schulder v. Edward R. Ladew Co., Inc., 178 App. Div.
gS Ca eed 27
Scott Paper Co. v. Marcalus Mfg. Co., Inc., 326 U. §.
249, 66 S. Ct. 101, 90 L. Ed. 47 ................... 9, 18

lina Railroad Company, 99 U. S. 191, 25 L. Ed. 319 26

vi

PAGE

Stanley v. Chris-Craft Corp., 21 N. Y. S. 2d 898, affd.
without opinion, 259 App. Div. 1038, 21 N. Y. S. 2d

ee eee? erry Cet rere rrr i ses eee er Tree 25
Stimpson Computing Scale Co. v. W. F. Stimpson

ig Ie es re NE eis teed carcerecvasians 10, 14
Tams-Witmark Music Library, Inc. v. New Opera

Company, Inc., 298 N. Y. 163, 81 N. E. 2d 70...... 14
Thuman v. Clawson & Wilson Co., 211 App. Div. 507,

ge Th Re OR Ra ee ere nee: rere 27
Union Switch & Signal Co. v. Johnson, 72 Fed. 147 (3

Ce Cie wah eed WONG AG Cease bested dghceveh saeeecs 10
United States Aluminum Co. v. Calvert Lithograph-

ing Co., 49 Misc. 491, 97 N. Y. S. 1042 ............. 26
Warth v. Liebovitz, 179 N. Y. 200, 71 N. E. 734 ...... 25
Watson v. Russell, 149 N. Y. 388, 44 N. FE. 161........ 25
Wilcox v. Williams, 92 Hun 250, 36 N. Y.S.944...... 26
Wilde v; Gunith, © Daly 106 o.oo. i ec cedees 13

OTHER AUTHORITIES

Federal Rules of Civil Procedure

Re rer eee ee ere erry ee ree 19
3 Moore’s Federal Practice (2d Ed., 1948) .......... 19
Restatement of the Law of Contracts

CMD Sik do soad be guktan se4 eS anes Ads oe RES ON 26

Revised Rules of the Supreme Court of the
United States

SE re ee er rr CEE ry

IN THE

Supreme Court of the United States

October Term, 1949
No. 763

De Boruezar IMPELLER Company, Inc.,

Petitioner,
v.

AMERICAN MacHINE AND Merats, Inc.,

Respondent.

ay.
v

BRIEF IN OPPOSITION TO PETITION FOR A WRIT
OF CERTIORARI TO THE UNITED STATES COURT
OF APPEALS FOR THE SECOND CIRCUIT

Defendant seeks review of a unanimous judgment (A. N.
Hanp, Cuase and Cuark, C.JJ.) affirming a declaratory

judgment (Coxz, D.J.) construing a contract between these
two parties.

No Reason Exists to Invoke the Jurisdiction
of This Court

No constitutional or Federal question is involved. No
important question of local law is presented. The decision
concerns only these two private litigants.

The main issue is over the construction of a long con-
tract executed in 1934. The contract expressly gives re-
spondent an absolute right to terminate it on six months’
notice. The question is whether, after termination, the

contract requires respondent to go out of the fan business
for all time.

The contract was not a standard form in general use.
It was specially prepared by the parties’ counsel over
months of negotiations. Its interpretation depends, basic-
ally, on its own particular language. The courts below,
construing the contract in light of its detailed provisions,
agreed that petitioner’s specious arguments were without
merit. That eminently correct conclusion involves no ques-
tion of general interest.

Even less consequential is the subsidiary issue. Claim-
ing that certain breaches occurred in the past, petitioner
asked, in four counterclaims also labelled as ‘‘defenses,’’
that respondent be compelled to pay stated damages and,
in addition, be visited with a special, novel penalty. It
argued that the contract should be rewritten to deprive
respondent of the right of termination or of the right to
make, after termination, unpatented goods which all the
world is free to handle.

The courts below—following New York law, which con-
cededly is controlling here—agreed that this astonishing
claim finds no basis in the local law. No case cited by peti-
tioner lends any support to its claim, which flies in the face
of numerous local decisions. The point is utterly lacking
both in merit and in general importance.

Review on writ of certiorari ‘‘ will be granted only where
there are special and important reasons therefor.’’ Rule
38, par. 58.* Here there is no reason whatever for granting
the writ—much less a ‘‘special’’ or ‘‘important’’ reason.

* Italics are ours throughout unless otherwise stated.

Opinions Below

The opinion of the Court of Appeals (628-645)* is
reported, 180 F’. 2d 342. The trial court wrote no opinion
but voiced his views during argument (377-420). The earlier
opinion of the District Court, holding petitioner’s four
‘‘defenses’’ insufficient (70-80), is reported, 82 F. Supp.
556.

Statement of Case
The Parties’ Situation in 1934

Prior to the contract petitioner (sometimes called ‘‘De
Bothezat’’) made and sold fans and ventilating equipment
in part of a loft building in New York City (F7, 608).

Petitioner was practically unknown in the business
(453). Its enterprise was a failure. From 1929 its gross
sales—never over $174,000 a year—declined steadily, fall-
ing to only $58,000 in 1933 (F8, 608; 174). Its net loss rose
to over $100,000 (F'8, 608; 485).

When the contract was made, petitioner’s operations
had virtually ceased. It had only 6 unfinished orders on
hand (35). It had long had only a skeleton force (F16, 610-
611; 270).

While petitioner had some equipment and machinery,
‘in very bad shape’’ (279), its principal asset consisted

* Unless otherwise stated, references in parentheses are to pages
of the record. When preceded by F, they designate findings of the
trial court; thus (F24, 613) denotes Finding 24, page 613 of the
record.

4

of certain patents and patent applications (on which pat-
ents later issued), which we shall call the ‘‘DeBothezat
patents.’’ Actually they were quite limited in scope (148-
150, 261-262), but petitioner thought them unequalled (Ex.
V, not printed). Its products embodied, or were supposed
to embody, these patented devices (F7, 608; 8, 97).

Despite intimations to the contrary (e.g., Pet. Br., pp.
3, 6), respondent’s organization was no stranger to the fan
business in 1934. Its immediate predecessor was actively
engaged in the fan business until 1931. Its subsidiaries
were making and selling fans when the contract was signed
(F'6, 607 ; 282-283, 355-358).

The Contract of April 3, 1934

Under the contract (7-52) Metals (respondent) did not
buy—or agree to buy—‘‘the DeBothezat fan business on
the installment plan’’ (Pet. Br., p. 6.). In fact, the ‘‘busi-
ness’’ is not even mentioned in the agreement, doubtless
because it was practically extinct.

The contract begins by referring to the DeBothezat pat-
ents (8). The very first paragraph provides for their quali-
fied conveyance to Metals ‘‘subject to the conditions of this
agreement’’ (9). One condition is that Metals must recon-
vey them on termination (19).

Certain ‘‘plant and equipment’’ was also assigned to
Metals (12), with a covenant to reconvey it, if still in ex-
istence, on termination (19-20). Other ‘‘plant and equip-
ment’’ was leased to Metals, with an option to buy it for
$1 after July 1939 (13-14).

5

In exchange, Metals agreed among other things to pay
petitioner royalties. Royalties are paid not on profits but
‘net sales’’ (15-16). Petitioner bears no part of Metals’
expenses or losses. Royalties have long exceeded the guar-
anteed annual minimum of $5,000. In recent years they
have averaged about $30,000 annually. By the end of Janu-
ary 1949, they had aggregated $250,000 (F'30, 615; 428).

Metals’ Absolute Right to Terminate

Paragraph Tenth of the contract gives Metals the ab-
solute right to terminate after the first year (F4, 607;
18-19):

‘One year after the date hereof or at any time
thereafter, Metals Corporation may give the De-
Bothezat Company notice, in the manner hereinafter
provided, of its intention to terminate this agreement,
and six (6) months after the notice shall have been
so given, this agreement .. . shall thereupon termi-
nate and Metals Corporation shall not be liable for
any payment under the provisions of Paragraph
Kighth hereof [the royalty provisions] accruing after
the period ending upon such termination.”

Elaborate provisions govern the parties’ rights after
termination. As just seen, even though Metals makes ar-
ticles on which royalties would formerly have been due, it

has no contractual obligation to pay petitioner anything.
In addition:

* Although petitioner dislikes the word “royalties,” the first
amendment to the contract ( prepared by petitioner in 1936) refers
to the “minimum royalty” and the “royalty payments” (36). Peti-
tioner’s representatives repeatedly referred to “royalties” (214, 472,
572, 573, 594).

1. On termination Metals reconveys the DeBothezat
patents (19).

2. For one year petitioner may require Metals (on pay-
ing its expenses) to assign patents or patent applications
‘‘covering any new inventions or new discoveries or im-
provements in the manufacture of the Products’’ (19).
There have been several such patents (F31, 616).

3. On termination Metals returns ‘‘such of the plant
and equipment’’ assigned to it ‘‘as it may then have on
hated’’ (19-20).

4. Fora year after termination petitioner may examine
and copy Metals’ ‘‘books and records’’ (20).

5. Within four months after termination Metals must
pay all royalties accruing before termination (20).

6. After termination Metals’ right to use the DeBothe-
zat name ceases (23).

Thus on termination Metals gives up certain rights and
retains all others. It keeps its factory, raw materials, work
in process and orders. It keeps all new machinery and
equipment it has acquired, its good will, its own name and
all trademarks and trade names it has developed.

Likewise Metals retains after termination the right—
which it always had—to make and sell fans not infringing
outstanding patents.

The Proceedings Below

The Court of Appeals has outlined the history of the
litigation (631-632). While the action continued, petitioner
received about $3,000 in royalties each month. It used
every means, therefore, to avoid and delay an adjudication.
So successful were its tactics that $70,000 in royalties were
paid during pendency of the action down to early 1949
(F30, 615; 428-430).

At the trial petitioner contended that the contract was
‘‘perfectly clear’’ (88), ‘‘clear on its face’’ (158), and un-
ambiguous (168). Nonetheless it submitted parol evidence
on its claim that the parties had orally agreed that Metals
would not stay in the fan business if it terminated the con-
tract. This evidence was offered to show that the contract
should be construed as petitioner claims or else reformed
so to provide.

Actually the parol evidence made it doubly plain that
the contract does not mean what petitioner claims. The
contract itself, however, clearly shows that Metals need not
quit the fan business after termination. Neither court be-
low found it necessary, therefore, to fall back on the parol
evidence to support its interpretation of the agreement.

One might suppose from petitioner’s brief that the
parol evidence was not passed upon. The fact is otherwise.

Most of the trial was devoted to taking the parol evi-
dence, pro and con. The witnesses’ testimony was conflict-
ing. No shred of documentary evidence supported peti-
tioner’s claim. On the contrary, between December 1933
and April 4, 1934, seven drafts of the proposed contract
were prepared by the parties’ lawyers (F13-21, 609-612),

8

but none—not even the four drafts of petitioner’s counsel
—contained any reference to the supposed oral agreement
(F25, 613). At one time, indeed, petitioner’s lawyer (and
vice-president) suggested that Metals make such an agree-
ment, but the suggestion was spurned (F'22, 612; 554-555).

During oral argument it was apparent that the trial
court did not credit petitioner’s story. At the last minute,
therefore, petitioner argued that the court should simply
omit findings on the issues raised by the parol evidence.
Of course the judge rejected that suggestion (417).

There are, in fact, voluminous findings on the parol evi-
dence (F'10-28, 608-615; F'36, 618). The court flatly found
that no agreement or representation was ever made—
either before or after the contract was executed—that
Metals would not make or sell fans after termination (F22,
24-25, 28, 36; 612-614; 618). Thus petitioner’s parol evi-
dence was considered and repudiated.

Petitioner’s main brief in the Court of Appeals again
raised the claim of an oral agreement. But its reply brief
expressly withdrew the reformation claim (633). On oral
argument, its counsel asked the court to disregard those
parts of Metals’ brief dealing with the parol evidence,
and the reformation issue was again withdrawn. Ac-
cordingly, as the Court of Appeals said, ‘‘we shall say
no more as to it’’ (633).

POINT I

The contract plainly does not prevent Metals, after
termination, from making fans which do not infringe
valid patents.

The Court of Appeals discussed petitioner’s tenuous
arguments so fully (633-641) that only a few points need
be added.

1. Had no contract been made, Metals would have
been free to make any unpatented fans it wished. Once
a DeBothezat patent expired, moreover, Metals would have
been entitled to make the fans formerly covered thereby,
for the patent laws ‘‘dedicate to all the public the ideas
and inventions embodied in an expired patent.’’ Scott
Paper Co. v. Marcalus Mfg. Co., Inc., 326 U. S. 249, 256.

What petitioner argues, therefore, is that after termi-
nation Metals is worse off than if it had never made the
contract. Metals is supposed to have foreclosed itself from
making any fans whatever except under the contract—to
have surrendered, for all time, rights which the whole
world enjoys, and which Metals would have had if the con-
tract had never been made.

Such a sweeping restraint on Metals’ freedom to com-
pete would be so extraordinary (to say nothing of its il-
legality) that one would naturally expect it to be expressed
in the plainest language. Business men represented by
experienced counsel do not leave such an onerous restric-
tion to fine-spun argument.

2. Particularly is that so because any competent lawyer
would know that no such restriction would exist in the ab-

10

sence of an express covenant. For it has long been settled
law that all disabilities arising out of a patent license or
agreement disappear when the contract ends.

When the contract is over, the former licensee or as-
signee will not be enjoined from making the self-same
goods as before, or compelled to pay for doing so, as long
as he infringes no patent. That is true whether he ter-
minates the contract himself,? or it is forfeited for his
breach,* or it ends in some other way.*

2 See, ¢.g., Antisdel v. Chicago Hotel Cabinet Co., 89 Fed. 308,
311-312 (7% Cir.), modified on rehearing, 90 Fed. 828; Stimpson
Computing Scale Co. v. W. F. Stimpson Co., 104 Fed. 893, 895
(6 Cir.) ; Bituminous Products Co. v. Headley Good Roads Co.,
2 F. 2d 83, 86, affd. on opinion below, 14 F. 2d 607 (3 Cir.) ; Demco,
Inc. v. Doughnut Mach. Corp., 62 F. 2d 23, 26 (4 Cir.), cert. den.
288 U. S. 605; Miehle Printing Press & Mfg. Co. v. Publication
Corp., 166 F. 2d 615, 618 (7 Cir.); Blain v. Sullivan-Waldron
Products Co., 78 F. Supp. 661, 662, affd. on opinion below, 172 F. 2d
221 (3 Cir.) ; Howe v. Atwood, 47 F. Supp. 979, 990; Dutchess Too!
Co. v. Kolb, 44 N. Y. App. Div. 624; Crossley v. Dixon, 10 H. L.
Cas. 293, 308; Redges v. Mulliner, 10 R. P. C. 21.

3 See, e.g., Dueber Watch-Case Mfg. Co. v. Robbins, 75 Fed. 17,
26 (6 Cir.) ; Eskimo Pie Corp. v. National Ice Cream Co., 26 F. 2d
901, 902 (6 Cir.) ; General Motors Corp. v. Rubsam Corp., 65 F. 2d
217, 222-223 (6 Cir.), cert. den. 290 U. S. 688; N. S. W. Co. v.
Wholesale Lumber & Millwork, Inc., 123 F. 2d 38, 41 (6 Cir.);
Pelham v. Edelmeyer, 15 Fed. 262, 264 (C. C. S. D. N. Y.); Hyatt
v. Ingalls, 124 N. Y. 93, 105; Mark v. Hyatt, 185 N. Y. 306, 309;
Saltus v. Belford Co., 1383 N. Y. 499, 504; Henderson v. Dougherty,
95 N. Y. App. Div. 346, 351-352 ; Schalkenbach v. National V entilat-
ing Co., 129 N. Y. App. Div. 389, 393-394; Electric Regulator Mfg.
Corp. v. American Mechanical Laboratories, Inc., 225 N. Y. App.
Div. 37; DeMille Co. v. Casey, 121 N. Y. Misc. 78, 86-88.

* See, ¢.g., Union Switch & Signal Co. v. Johnson, 72 Fed. 147,
152 (3 Cir.) ; International Burr Corp. v. Wood Grinding Service,
Inc., 34 F. 2d 905, 907 (2 Cir.) ; Paine & Williams Co. v. Baldwin
Co., 113 F. 2d 840 (6 Cir.) ; Measurements Corp. v. Ferris Instru-
ment Corp., 159 F. 2d 590, 593 (3 Cir.) ; Brusie v. Peck Brothers &
Co., 185 N. Y. 622, 625-626; Denise v. Swett, 142 N. Y. 602, 605.

11

Clear, unequivocal language must therefore be used to
deprive a contracting party of his right, after termination,
freely to make goods infringing no valid patent.° Of course
that right persists after the contract ends, unless it is ex-
pressly abridged. To argue (Pet. Br., pp. 8, 13) that the
right is lost unless expressly preserved is frivolous. It
would be just as unsound to argue that, because petitioner’s
right to make unpatented fans after termination is not
expressly preserved, it may not make such fans when the
contract ends.

3. Indeed, when a party’s right to compete was to be
restricted after termination of the contractual relation-
ship, this very agreement said so unequivocally.

The contract obliged Metals to employ for a year Dr.
DeBothezat (petitioner’s president and the inventor of
the DeBothezat patents) under an agreement called Sched-
ule D (15), which provided (29) :

‘“‘Dr. DeBothezat further agrees that, provided and
while said agreement [i.e., the main contract] is in
force and while he is in the employ of the Metals
Corporation, and in any other event for five years
after the date of the termination of such employment,
he will not, directly or indirectly, engage in the busi-

° See, ¢.9., Eskimo Pie Corp. v. National Ice Cream Co., 26 F. 2d
901 (6 Cir.) ; Picard v. United Aircraft Corp., 128 F. 2d 632, 637
(2 Cir.), cert. den. 317 U. S. 651; Pennington Engineering Co. v.
Houde Engineering Corp., 136 F. 2d 210, 216 (2 Cir.) ; Measure-
ments Corp. v. Ferris Instrument Corp., 159 F. 2d 590, 593 (3 Cir.) ;
Miehle Printing Press & Mfg. Co. v. Publication Corp., 166 F. 2d
615, 618 (7 Cir.); Conmar Products Corp. v. Universal Slide
Fastener Co., Inc., 172 F. 2d 150, 156 (2 Cir.) ; De Cew v. Union
Bag & Paper Corp., 5% F. Supp. 388, 403-404.

12

ness of manufacturing or selling fans or impellers
that are competitive with any products manufactured
or manufacturable pursuant to or under any of the
inventions, applications or Letters Patent referred
to in said agreement.’’

Thus if the parties intended to prevent Metals from
making fans, after termination of the contract, apt words
lay right at hand. They had only to say that ‘‘after the
termination of this contract, Metals will not, directly or
indirectly, engage in the business of manufacturing or
selling fans or impellers.’’ They said nothing of the sort.

4. Petitioner relies on the following sentence (23):

‘‘Metals Corporation further agrees that the New
Company will not engage in the manufacture and
sale of any products which compete with the Products
to be manufactured and sold hereunder.’’ ®

This covenant manifestly was intended to prevent di-
minution of the royalties which petitioner would receive,
while the contract lasted, on the sale of the Products made
under the agreement. Of course, like every other provi-
sion in the contract not specifically preserved after termi-
nation, this covenant dies with the contract, for ‘‘after such
termination all parts of the contract would cease to have
further operation.’’ Johnson v. Union Switch & Signal

§ “Products” is a word of art in the contract, designating all fans
and other products made under Dr. DeBothezat’s inventions (8).
“New Company” means “a new corporation to be formed, under
the name of DeBothezat Impeller Corporation or such other name
as Metals Corporation may select, hereinafter referred to as the New
Company” (21-22). It is utterly different from Metals.

13

Co., 29 N. E. 964, 965, reported as memo only in 129 N. Y.
653.7

Indeed, the covenant cannot apply after termination.
No ‘‘Products’’ could ‘‘be manufactured and sold here-
under’’ after termination of the contract, and no ‘‘prod-
ucts’’ could ‘‘compete with’’ such Products thereafter.

Thus petitioner is forced to rewrite the covenant by
adding to, and changing, its language:

‘*Metals Corporation further agrees that, after ter-
mination of this agreement, Metals Corporation will
not engage in the manufacture and sale of any prod-
ucts identical with or competitively similar to the
Products which were formerly to be manufactured
and sold hereunder.’’

That is not construction; it is complete revision.

Little need be added to the Court of Appeals’ analysis.
After termination of the contract, Metals ‘‘could not fur-
ther proceed under it,’’ Hyatt v. Ingalls, 124 N. Y. 93, 105,
and ‘‘cannot be said to be manufacturing under the con-
tract’’ Schalkenbach v. National Ventilating Co., 129 N. Y.
App. Div. 389, 393. ‘‘Any future manufacture of the
patented article could not be under the license,’’ Saltus v.
Belford Co., 133 N. Y. 499, 504, and articles falling within
the patents would be made ‘‘not under the patent but in
hostility to it,’’ Marston v. Swett, 82 N. Y. 526, 534.

* For other applications of this principle to royalty contracts see,
e.g., K-W Ignition Co. v. Temco Electric Motor Co., 243 Fed. 588,
590 (6 Cir.), cert. den. 260 U. S. 746; Goodwin v. Camp, 295 Fed.
785, 791-792 (6 Cir.) ; Eskimo Pie Corp. v. National Ice Cream Co.,
26 F. 2d 901, 902 (6 Cir.) ; Blain vy. Sullivan-Waldron Products Co.,
78 F. Supp. 661, 662, affd. on the opinion below, 172 F. 2d 221
(3 Cir.) ; Wilde v. Smith, 8 Daly (N. Y.) 196, 208.

14

In Stimpson Computing Scale Co. v. W. F. Stimpson
Co., 104 Fed. 893 (6 Cir.),® the licensee had ‘‘the right
to determine this contract, and their obligation there-
under . . . by giving six months’ notice in writing . . .
of their intention to discontinue the manufacture and sale
of such scales under this contract.’’ The court held that,
after the notice was given, the licensee had a perfect right
to keep making the same scales as before unless he in-
fringed some outstanding patent. It said (p. 895):

‘“We think it gave the licensee the right to determine
the contract by giving the prescribed notice of its
intention not to proceed further under the contract
after the time stated in the notice shall expire. The
manufacture and sale of such scales ‘under this con-
tract’ would then cease. Effect must be given to all
the language of a contract where possible, and we see
no difficulty in applying this rule of construction
here. There was nothing in the contract which im-
posed a further disability upon either party after it
should have been brought to an end by the exercise
of a right reserved therein.’’

5. Petitioner argues that it would have been ‘‘foolish’’
to ‘‘have given away its business . . . on such terms”’
(Pet. Br., p. 7). The short answer is that Metals would
have been doubly foolish to have given up, forever, its right
to make fans except under the contract, for the dubious
privilege of trying to revive the bankrupt, moribund
DeBothezat enterprise. But the argument is unsound.

Petitioner gave nothing away. It made an excellent
bargain under which it has received over $250,000 without

8 This case was recently cited in Tams-Witmark Music Library,
Inc. v. New Opera Company, Inc., 298 N. Y. 163, 173.

15

lifting a finger. It made sure that on termination it would
both get back the DeBothezat patents and acquire new
patents which it had no part in devising. Thus its com-
petitive position would not merely be maintained but en-
hanced. To compensate for any possible loss of the
‘knowledge of its business’’ it ensured itself access to
all Metals’ ‘‘books and records’’ for a year after termina-
tion. Any possible ‘‘impediment’’ which might be ‘‘caused
by the interruption of its operations’’—which had all but
ended anyhow—was evidently deemed trifling compared to
the manifold benefits which petitioner expected to (and
did) derive from the contract. The plea for sympathy
is simply specious.

6. How misguided is petitioner’s reliance on Cammaci
v. Slattery & Bro., Inc., 241 N. Y. 39, was pointed out
below (640-641).

Cammack owned an unpatented invention for radia-
tors which he kad never disclosed. While he kept it to
himself no one could use it. To induce him to disclose
it, Slattery agreed to pay him ‘‘a royalty of ten per cent
of the selling price of all . . . radiators, manufactured
by them, their heirs, assigns or successors’? (209 App.
Div. 877, 878). That obligation had no time limit. The
contract had no termination clause. Slattery sent a no-
tice saying it was terminating, but kept on making the
radiators. Of course it was held liable for the promised
royalties.

(a) The lower courts thought that Slattery could not
terminate. The Court of Appeals preferred to say that
Slattery had ‘‘elected to continue to operate’’ under the
contract (p. 47). ‘‘If we assume, as I think is the fact,

16

that defendant might have terminated its contract at any
time and did serve purported notices of intention so to do,
the answer is that it did not as a matter of fact terminate
the contract but continued to manufacture and sell radia-
tors’’ (p. 45).

But here the contract expressly provides how and when
it can be terminated. After one year Metals can terminate
merely by sending a notice of termination. As pointed out
in New York Telephone Co. v. Jamestown Telephone Corp.,
282 N. Y. 365, where (as here) the contract expressly con-
fers the right to terminate on notice, the Cammack case
is quite inapplicable. There notice of intention to termi-
nate was ‘‘accompanied by acts inconsistent with any in-
tention to terminate’’ (p. 373), and, as Chief Judge Lehman
added (pp. 373-374) :

‘*Notice of intention to terminate a contract is an
empty gesture where it appears that the intention is
to terminate only the obligation imposed by the con-
tract and not the right to benefits derived from the
contract, for the contract gives no right of partial
revocation. So we held in that case, but the rule has
no application here for here on the date when the
notice became effective according to the terms of the
contract, nothing had been said or done which ren-
dered the notice ineffective. Then the contract was
at an end,”’

So here, when the notice becomes ‘‘effective according
to the terms of the contract,’’ the entire agreement is ‘‘at
an end’’—both the ‘‘obligation imposed by the contract’
and the ‘‘benefits derived from the contract.’’

(b) Since the Cammack contract was silent on termi-
nation, the court had to speculate what the parties prob-

i

17

ably would have said on that subject if they had considered
it. It thought it was fair to imply that Slattery should not
be compelled to make the radiators but, if it chose to do
so, should abide by its unlimited promise to pay royalties
‘‘such as it had agreed to pay’”’ (241 N. Y., at p. 45). Other-
wise Slattery would keep everything and give up nothing.

Unlike Slattery, however, Metals never ‘‘agreed to
pay’’ royalties forever. On the contrary, the obligation
to pay royalties ceases on termination: ‘‘Metals Corpora-
tion shall not be liable for any payment . . . accruing after
the period ending upon such termination’’ (19). That
language would be pointless if Metals were precluded from
making fans on termination. It makes it plain that Metals
is free to make fans after termination without incurring
any contractual liability to petitioner.

(c) Furthermore, Metals does not keep everything
and give up nothing on termination. It is absurd to argue
that Metals claims ‘‘a supposed alternative to pay or not
to pay for what has been received’’ (Pet. Br., p. 17).

On termination Metals surrenders its immunity from
infringement suits, gives up the DeBothezat name, and so
on. It also loses the benefit of petitioner’s continuing cove-
nants to disclose new inventions (11) and to refrain from
competition (23). In fact, Metals relinquishes ‘‘benefits’’
which were not ‘‘derived from the contract,’’ e.g., its im-
provement patents.

Thus this contract—unlike the Cammack agreement—
specifies the ‘‘benefits’’ which Metals must relinquish ou
termination. Implications as to what the parties might
have thought equitable, if they had been silent, are there-
fore beside the point. The contract itself specifies exactly
what rights Metals must equitably give up on termination.

18

(d) Finally, the right which Slattery was trying to
exercise was truly a ‘‘benefit derived from the contract”
—the common-law right to use an undisclosed secret in-
vention. But the rights which Metals wants to enjoy after
termination are not ‘‘derived from the contract”’ at all.

Metals wishes to make fans which do not embody the
invention of any DeBothezat patent. Metals always had
that right; it did not come from the contract. It also wishes
to make fans embodying the inventions of expired patents.
Far from being derived from the contract, that right is
conferred by the patent laws.°

In short, the Cammack case is wholly inapposite from
start to finish. It involved utterly different questions un-
der an utterly different contract.

The agreement is quite clear—Metals is free to make
fans, after termination, which do not infringe patents then
subsisting.

POINT II

The four “defenses” pleaded by petitioner were
clearly insufficient.

Certain matters having nothing to do with Metals’
right to terminate, or to make unpatented fans after ter-
mination, were pleaded by petitioner both as counterclaims
and ‘‘defenses.’’ At a pre-trial conference the District
Court held that these counterclaims were insufficient as
‘‘defenses’’ (75-80). The Court of Appeals agreed (641-
645). Petitioner cites no case even indicating that ap-
plicable local decisions are in conflict.

® Scott Paper Co. vy. Marcalus Mfg. Co., Inc., 326 U. S. 249,
255-256.

19

A. The Four “Defenses.”

Petitioner’s discussion goes so far afield that it is note-
worthy to see just what its ‘‘defenses’’ actually said.”

No ‘‘irreparable injury’’ was charged—though it would
be immaterial if alleged. On the contrary, these four
‘‘defenses’’ alleged specific money damages. Nowhere was
it averred that the acts charged would ‘‘impair’’ peti-
tioner’s ‘‘capacity to resume operations’’ (Pet. Br., p. 21).
Certainly there was no allegation that the usual remedies
provided by law would be ineffectual to afford complete
relief.

1. The second ‘‘defense’’ alleged that Metals had ‘‘con-
verted to its own use or destroyed the leased equipment
referred to in paragraph Third and Schedule B of said
agreement of April 3, 1934, to the damage of defendant in
the amount of $100,000’’ (56), and argued that Metals
should not be allowed to terminate ‘‘until [it] turns over
to defendant equivalent equipment’’ (56-57).

While the contract does not require Metals ‘‘to return
the leased machinery in the event of cancellation’’ (Pet.
Br., p. 21)—on the contrary, it was to be redelivered in

10 Petitioner faintly suggests that sufficiency of the “defenses”
should not have been resolved at a pre-trial conference (Pet. Br., p.
20). It is enough to say that (a) it is completely immaterial that the
“defenses” were held insufficient at a pre-trial conference, rather
than at motion part or at the trial, (b) of course the sufficiency of
“defenses” may be determined at a pre-trial conference, as shown
by the cases cited below (72) and in 3 Moore’s Federal Practice
(2d Ed. 1948), pp. 1105, 1111, 1121-1123, and (c) the District Court
properly acted under Rule 16 to simplify the issues, speed the trial
and lift the case from the procedural morass in which petitioner had
bogged it down (67-69, 71-72).

20

1940 unless Metals bought it for $1 (13-14)''—it would
make no difference if it did. The leased equipment was
second-hand even in 1934. It was bound to wear out. In
1940 it could be bought for $1. Actually petitioner had so
little interest in the leased equipment that it did not sue
until 1948. If the worn-out remnants would now have any
useful value, damages would afford petitioner complete
relief.

2. The third ‘‘defense’’ avers that at some unstated
time, by some unstated act, Metals ‘‘violated its contrac-
tual obligation to use the name DeBothezat in the promo-
tion and sale of said products to the damage of defendant
in the amount of $50,000’’ (57).

For all that appears, the name—as a result of Metals’
extensive use of it (603; Exs. D, W)—is a thousand times
better known now than in 1934. But if petitioner ever
supposed that Metals was not using the name as required,
it had only to apply for injunctive relief. None was sought
in the answer. None has been sought to date.

3. Petitioner suggests that the certified audits alluded
to in its fourth ‘‘defense’’ were intended to enable it to
‘*plan in advance its campaign to reestablish its business”
(Pet. Br., p. 21). Actually the audits have nothing to do
with ‘‘reestablishment’’ of petitioner’s activities after
termination."* They simply enabled petitioner to have

11 Moreover, Metals has no duty to redeliver on termination “any
part of such plant and equipment which it shall have used or dis-
posed of or which shall have been destroyed or discarded, whether
or not by [its] negligence or fault’’ (20).

12 That subject is taken care of by the totally different provision
affording petitioner access, for one year after termination, to Metals’
“books and records” (20).

21

Metals’ certified public accountants check, annually, on
Metals’ own monthly statements of ‘‘net sales and receipts
from licenses’’ (18).

But if petitioner was dissatisfied with the audits pre-
pared by Metals’ certified public accountants, and thought
that the $10,000 damages claimed (57) would not afford
sufficient relief, it had ample remedies at hand. It had
only to sue to compel fuller reports to be furnished. Or
petitioner could—and still can—have an audit made by
independent accountants (18). No such relief has ever
been sought.

4, The sixth ‘‘defense’’ merely says that Metals ‘‘failed
to use its best efforts to promote the sale of said products,
to defendant’s damage in the amount of $500,000’’ (58).
It does not even claim that the unrevealed acts affect
Metals’ right to terminate.

Before the contract, petitioner’s sales had dwindled to
$58,000 in 1933, and it was steadily losing money (F8, 608).
Under the contract its royalties have been paid on net sales
which, for years, have been over $1,000,000 (605). But if
petitioner had ever supposed that Metals was not using
its best efforts to promote sale of the Products, it had ample
legal measures to remedy the situation.

Indeed, if petitioner had ever thought—as it now ar-
gues—that the supposed breaches were of any consequence,
it would have taken prompt action to remedy the situation
long ago. As far back as 1946, it knew that Metals in-
tended to terminate and keep on in the fan business (F33-
34, 617). Petitioner did nothing. When this action was
brought, indeed, it claimed that there was no dispute to
resolve (631-632).

22

Certainly, if the imaginary evils which petitioner now
conjures up had been regarded as of moment, at the very
least it would have asked for injunctive relief when its
answer was filed. It chose not to do so. Over two years
have gone by since then. No injunctive relief has yet been
sought.

The assertions that petitioner ‘‘has been here stayed
from pressing its counterclaims”’ (Pet. Br., p. 24), and that
the courts enjoined it ‘‘from seeking equitable relief’’ (Pet.
Br., p. 26), are unworthy. No such stay or injunction has
ever been granted or even applied for. The decision not
to invoke the usual equitable remedies was petitioner’s own.
Doubtless it thought that its inaction would lend some
color to its present arguments.

Possible breaches of the contract afford no ground for
revising the contract to extinguish or limit Metals’ ab-
solute right to terminate and keep on in the fan business.

B. The Acts Charged Do Not Affect Metals’
Right to Terminate.

An absolute power of termination is not, as petitioner
seems to think, a reward for due performance. It is simply
‘‘a right given by contract to limit its life by notice that
the contract will terminate at a time fixed by the notice.”
New York Telephone Co. v. Jamestown Telephone Corp.,
282 N. Y. 365, 372.

The contract specifies what happens if Metals ‘‘shall
fail or neglect to keep or perform any of the terms, cove-
nants and conditions of this agreement on its part to be
performed’’ (20). Breaches do not suspend or extinguish

23

Metals’ right to terminate. Petitioner may notify Metals
‘‘wherein it is claimed to have been in default’’ (21). If
Metals does not dispute the default, and it continues for
thirty days, petitioner may ‘‘terminate this agreement and
all rights granted hereunder’’ (21).* Clearly all Metals’
‘‘rights granted hereunder’’ (including its absolute right
to terminate) remain alive, despite breaches, until the con-
tract is terminated by the prescribed procedure.

Thus—even though possible breaches by Metals were
contemplated when the contract was executed—the ‘‘de-
fenses’’ try to rewrite the contract by inserting limitations
on Metals’ right to terminate which the parties chose not
to include.

Petitioner cites no New York case justifying such dras-
tic surgery on a contractual right of termination.

1. Cammack v. Slattery & Bro., Inc., 241 N. Y. 39 (Pet.
Br., p. 22), is utterly irrelevant. The court did not even.
suggest that a person would be debarred from exercising
a right to terminate, expressed by contract, because of his
supposed prior breaches. It merely held, as already seen,
that defendant had ‘‘elected to continue to operate’’ under
the contract (p. 47).

2. Lipman v. Niagara Fire Ins. Co., 121 N. Y. 454 (Pet.
Br., p. 23), contains an obiter dictum that a company which
has been paid to insure against a risk cannot cancel the
policy when it knows that the risk is on the very verge of
maturing and the insured cannot obtain other insurance

18 Tf Metals disputes the claimed default in good faith, the thirty
days do not “run until a final determination against such contention
shall have been made by a tribunal of competent jurisdiction” (21).

24

before it does mature.'* Obviously the dictum has nothing
to do with this case. Besides, in a later decision an in-
surance company was held free to cancel the policy, even
though it had previously breached its obligations, and even
though termination would cause the insured irreparable
injury because he had become uninsurable. Jones v. Com-
mercial Travelers’ Mut. Accident Assn., 201 N. Y. 576,
where the Court of Appeals refused to apply the Lipman
dictum, which had been relied on by the lower court, 114
N. Y. 8. 589.

3. Friedman v. Connecticut General Life Ins. Co., 251
App. Div. 292, leave to appeal denied, 275 N. Y. 649 (Pet.
Br., p. 23), far from supporting petitioner, followed the
Jones case and allowed the insurance company to cancel
the policy.

Actually petitioner’s argument is contrary to estab-
lished principles of local law. Repeatedly the New York
courts have refused to make an entirely new agreement
for the parties by importing restrictions into an absolute
power to terminate.

Thus, the right to terminate may be exercised regard-
less of purpose or motive,” or the serious effect of cancella-

14 The point did not arise in the Lipman case at all. Indeed, the
court held that the termination notice was perfectly valid and effective
when given, although it afforded the insured no time at all to obtain
new insurance (121 N. Y., at p. 461).

18 See e.g., International Life Ins. & Trust Co. v. Franklin Fire
Ins. & Trust Co., 66 N. Y 119, 123; Friedman vy. Connecticut Gen-
eral Life Ins., Co., 251 App. Div. 292, 293, leave to appeal denied,
275 N. Y. 649; Biber Bros. News Co., Inc. v. New York Evening
Post, Inc., 144 Misc. 405, 408; Okst v. Metropolitan Life Ins. Co,
50 N. Y. S. 2d 919, 92%; MacDonald Bros., Inc. v. Halston,
63 N. Y. S. 2d 909, 911-912.

25

tion on the other contracting party.’* Similarly, breach
by a party does not affect his exercise of that right." Thus
the measure of damages for breach by wrongful repudiation
of a contract is only the amount which would have been
payable thereunder if the right to terminate had been duly
exercised.’* That is true even if suit based on a prior
breach was pending when the wrongful repudiation oc-
cured.’® Nor is exercise of the right to terminate affected
by the fact that damages for existing breaches are incapable

16 See, e.g., Chatham Plan, Inc. v. Clinton Trust Co., 246 App.
Div. 498, 499, app. dismissed, 272 N. Y. 497; Stanley v. Chris-Craft
Corp., 21 N. Y. S. 2d 898, affd. without opinion, 259 App. Div. 1036 ;
Randall v. Michelin Tire Co., 137 Misc. 570, 571.

17In fact, Mason v. Electrol, Inc., 292 N. Y. 482, held that,
where the agreement so purports to provide, the breach can actually
result in the termination of the contract. The court rejected the
argument that the breaching party should be “estopped from assert-
ing its own default as a ground for extinguishment of its obligation”
(p. 487).

18 So, if an employer reserves a right to terminate on notice, a
wrongfully discharged employee can recover only the wages pay-
able during the period of notice. See, ¢.g., Watson v. Russell, 149
N. Y. 388, 392; Barth v. Addie.Co., Inc., 271 N. Y. 31, 35; Gallo
v. Mayor, etc. of New York, 15 App. Div. 61, 64; Inglesi v. Hickson,
Inc., 195 App. Div. 585, 587; Robertson v. Charles Frohman, Inc.,
198 App. Div. 782, 787, app. dismissed, 233 N. Y. 530; Beck v.
Fybern Holding Corp., 238 App. Div. 25, 28; Bitterman v. Gluck,
256 App. Div. 336, 337. The rule is not confined to employment
contracts, but applies to all contracts. Warth v. Liebovitz, 179 N. Y.
200, 204-205; Chatham Plan, Inc. v. Clinton Trust Co., 246 App.
Div. 498, 500, app. dismissed, 272 N. Y. 497.

1® “Tt is hard to see how that circumstance could add to the value
of the contract to the plaintiff or diminish a privilege reserved by
the contract to the defendant.” Barth v. Addie Co., Inc., 272 N. Y.
31, 36; see also Bogy v. Berlage, 265 App. Div. 249, 251.

26

of precise computation and therefore irreparable.” Like-
wise it is immaterial that termination by the breaching
party would cause irreparable damage.”

These rules are perfectly sensible and just. The law
provides a contracting party with adequate remedies if he
thinks a breach of contract has occurred. Courts cannot
appropriately rewrite contracts to deprive a party of a
right to terminate without which he would never have made
the agreement in the first place. One reason, indeed, why
a party reserves the right to terminate is to enable him to
end his continuing liability under the contract and thus
protect himself against new claims of additional breaches.

Moreover, petitioner’s argument runs afoul of a more
general principle of New York law. A party affected by
a breach of a contract has a choice. He may keep the con-
tract alive and sue for damages and injunctive relief. Or,
if the breach is substantial, he may terminate the contract.
But he cannot keep part of the contract alive and terminate

2© United States Aluminum Co. v. Calvert Lithographing Co., 49
Misc. 491, 492 (App. Term), breach by unauthorized misuse of
patented inventions; Motion Picture Trade Directory Co., Inc. Vv.
Wallace, 186 N. Y. S. 80, 82 (App. Term), affd. without opinion,
197 App. Div. 938, breach by failure to return special List deemed
so precious that contract provided that defendant had to return it
before it could terminate.

21 Jones v. Commercial Travelers’ Mut. Accident Assn., 201
N. Y. 576, supra, p. 24. The same rule underlies the principle
that “Specific performance will not be decreed against a party who
has the power of terminating his contractual duty,” Restatement
of the Law of Contracts, §377; Wilcox v. Williams, 92 Hun (N. Y.)
250, 252; Hart v. Hart, 188 App. Div. 283, 284-285. As this court
tersely put it, “A court of equity never interferes where the power
of revocation exists.” Southern Express Co. v. Western North
Carolina Rd. Co., 99 U. S. 191, 200.

27

the rest. If he keeps it alive at all, it ‘‘exists for the
benefit of both parties;’’ he can no longer use the breach
defensively, and his sole ‘‘remedy is the recovery, in coun-
terclaim or action, of [his] damages.’’

Here, despite the alleged breaches, petitioner did not
terminate but insisted (and still insists) that the contract
be kept alive. Consequently all provisions of the contract
—the termination clause included—remain in full force and
effect. The decision below to that effect was entirely
correct.

C. The Acts Charged Do Not Affect Metals’
Right to Make Fans After Termination.

Even more fanciful is petitioner’s contention that the
alleged breaches affect Metals’ right to make, after termi-
nation, fans infringing no subsisting patent.

No case is cited which supports this argument. Russell
Hardware & Implement Mfg. Co. v. Utica Drop Forge &
Tool Co., 195 N. Y. 54 (Pet. Br., pp. 24-25), is really op-
posed to it. There the court held that the exclusive license
of a patented staple puller should be cancelled because of
the licensee’s acts, and it enjoined the licensee from exer-
cising any further rights under the contract. But the li-
censee was not enjoined from making any article whatever

22 The quotations are from Rosenthal Paper Co. v. National
Folding Box & Paper Co., 226 N. Y. 313, 324. For other examples,
see Dalzell v. Fahys Watch Case Co., 138 N. Y. 285, 290; Anheuser-
Busch Ice & Cold Storage Co. v. Reynolds, 221 App. Div. 174;
Thuman v. Clawson & Wilson Co., 211 App. Div. 507, 510; Schulder
v. Edward R. Ladew Co., Inc., 178 App. Div. 458, 462; Pitts v.
Jameson, 15 Barb. (N. Y.) 310, 317.

28

(patented or unpatented) after the contract ended.” On
the contrary, the court said that the ‘‘only adequate relief

. was to terminate the contract and, thus, to cancel all
rights to manufacture under the patents;’’ ‘‘annulment of
the contract proper’’ was ‘‘the only just remedy to be
applied’’ (p. 61).

Numerous other New York cases are contrary to pe-
titioner’s contention. Hyatt v. Ingails, 124 N. Y. 93, was
cited in the Russell case (195 N. Y., at p. 62). There a
license to make goods under plaintiffs’ patent was judicially
cancelled because defendants had failed to pay royalties
and report sales. Because of these grave breaches, the trial
court enjoined defendants from making the patented articles
after cancellation. On appeal the injunction was dissolved.
It was erroneous because it ‘‘restrained the licensees per-
petually from manufacturing the patented article without,
in express terms, merely forbidding it under the license.”’
Mark v. Hyatt, 135 N. Y. 306, 309. ‘‘Any future manu-
facture of the patented article could not be under the license
judicially rescinded, and must of necessity be either lawful
or an infringement over which the court could have no
jurisdiction.’’ Saltus v. Belford Co., 133 N. Y. 499, 504.

That is settled New York law. Even when the breaches
by one party are so serious that the court will cancel the
contract, he will not be prevented from making any goods

28 The injunction restrained defendant “from further exercise
of any of the rights in the business, trade and good will of the
Russell staple puller [i.e., plaintiff's patented device], received by it
under said contract or pursuant thereto, and from using any of the
cuts, illustrations and testimonials of the Russell stape puller, a¢-
quired of plaintiff or pursuant to said contract, in advertising or
selling a staple puller” (Record on appeal, fols. 331-333).

29

whatever after the contract is ended. Once the contractual
relationship ends, in short, both parties are equally free
to make any and all goods which do not infringe valid
patent rights.* The Court of Appeals correctly so held.

CONCLUSION

No reason exists why this Court should review the case.
The petition is singularly without merit and should be
denied.

Dated: New York, N. Y., May 17, 1950.
Respectfully submitted,

AupHonsE KENISON,
Attorney for Respondent,
233 Broadway,

New York 7, N. Y.

Leonarp P. Moore,
CHaARLEs PICKETT,
of Counsel.

*4Other New York cases to the same effect are cited supra,
notes 3 and 4. For other examples, see Hirsh & Schofield, Inc.
v. Gusmer, 179 App. Div. 347, 353, affd. without opinion, 226 N. Y.
649; Redican v. Interchangeable Magnetic Sign Co., Inc., 162 App.
Div. 803, 805; Lamont, Corliss & Co. v. Bonnie Blend Chocolate
Corp., 1385 Misc. 537, 539.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386417_0131%3A2. Public record. Not legal advice.