# Petition for Writ of Certiorari — A. B. T. Manufacturing Corp. v. National Rejectors, Inc.

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 1951
- **Citation:** 340 U.S. 912

## Text

Ty FITTED
“Aiov 24 r059

IN THE

Supreme Court of the United States

Octoser Trem, 1950.

A.B.T. MANUFACTURING CORPORATION,
Petitioner,

vs.

NATIONAL REJECTORS, INC.,
Respondent.

PETITION FOR WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS FOR
THE SEVENTH CIRCUIT AND BRIEF IN SUP-
PORT.

CuareNnce E. THREEDY,
Attorney for Petitioner,
111 West Washington Street,
Chicago 2, Illinois.

THE GUNTHORP. WARREN PRINTING COMPANY, 210 WEST JACKSON, CHICAGO

INDEX.

PAGE
Petition for Writ of Certiorari.......---+sseerttrtt! 1
Summary and Short Statement.......----+++e0: 2
Pabatiallh oo sven cece ck 8 ore ene een es se 9
Questions Weeeemted . «oss sc cc sececeseses cers 11

Reasons Relied Upon for Allowance of This Peti-
a ein kamke Ksee eee ee eee een S PORE RES 12
Brief in Support of Petition for Writ of Certiorari... 15
Statement of the Case......----ssererrrrrert 16
Specification ......--eeeeeeeeeerer essen 16
Ma nbd 50 8D TIAL I ETS ON 16
ED Ere ei A ney adage ae se 25
ME 5 58 Ke eh AREA TS 27

TABLE OF CASES.

Aktieselskabet Cuzea v. The Sucarseco, 294 U.S. 394. 10, 20
Anakin Lock Works v. Dillon Lock Works, 292 F. 45

ee se Lk tee biel, aapanaae 24
Bacardi v. Domenech Treasurer, 311 U.S. 150..... 9,18, 23
Baldwin v. Iowa State Traveling Men’s Association,

ee OO. ok. cin nadvalen tx earee ae eeeeh ete 10, 23
City of Des Moines v. Des Moines Water Co., 218 F.

939 (D. C. Iowa), affirmed 230 F. 570....---++++++> 21

Craft Tint Mfg. Co. v. Baker, 94 F. 24 369 (C.A.9)... 24

Duplate Corp. & Pittsburgh Plate Glass Company v.
Triplex Safety Glass Company of North America,
ee My ee ere eee eth 9,19

Exhibit Supply Co. v. Ace Patents Corp., 315 U. S.

il

Freeman on Judgments (Sec. 1352, p. 2776, 5th Ed.)... 29

Frink Co., inc. v. Erikson, 20 F. 2d 707 (C. A.1)...... 23
Hariell v. Tilghman, 99 U. S. 547... .............002. 19
Machine Co. v. Murphy, 97 U. S. 120................ 24
TE, ee Els Os GI 0 ocak ote nc snsacsennns 10
Merevid Corp. v. Mid-Continent Investment Co., 320

= FS a eee eee ape ere mmry rr ere Maken tame 19
Muncie Gear Works v. Outboard Marine Mfg. Co., 315

I Gs eka aidan pune s+ ananeeeee 10, 25
People v. Spring Lake District, 253 Ill. Supp. 479..... 21
Ruth v. Climax Molybdenum Co., 93 F. 2d 699 (C. A.

Be Se ekeee deter sa dawtedbads coven ceaveanees 24

Sanitary Refrigerator Co. v. Winters, 280 U.S. 30.... 24
Schriber-Schroth Co. v. Cleveland Trust Co., 305 U.S.

EP Eee et EEL OE SPD Oe OREO SY. 10, 25
Sheldon v. Metro-Goldwyn Pictures Corp., 309 U. S.
WE erat A ae Be a ein ie ny eee Aes 9, 18, 23
Siegel, Jacob Co. v. Federal Trade Commissioner, 327
Cee et et i vewesskaakenscasneesd 10,18
Standard Dental Mfg. Co. v. National Tooth Co. (C. C.
ee ee eer rey ter ere 19
Steingruber et al. v. Johnson et al., 35 F. S. 622 (D. C.
EG Utes Sah eau cae ews kW he wenn ethane sku 22
Stoehrer & Platt Corp. v. Lusse Bros., 7 F. 2d 87 (C. A.
Me. S. Cha sack Pu ba KAMA eth dK iwe Senses ake eh 24
United Carbon Co. v. Binney & Smith Co., 317 U. S.
Beh iady acide bin da Oh debe ub eeedneaseh 9, 18, 23

Williams Manufacturing Co. v. United Shoe Mfg. Co.,
BE ee Te I eka RULE Scie eeeatnn 10, 18, 24

IN THE

Supreme Court of the United States

Ocrosper TERM, 1950.

de Tse

A.B.T. MANUFACTURING CORPORATION,
Petitioner,

vs.

NATIONAL REJECTORS, INC.,
Respondent.

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

To the Honorable the Chief Justice of the United States
and the Associate Justices of the Supreme Court of the
United States:

Your petitioner, A.B.T. Manufacturing Corporation, re-
spectfully prays for a writ of certiorari to the Court of
Appeals for the Seventh Circuit to review the judgment
entered by that court on October 10, 1950.

The transcript of the record in the case, including the
proceedings in said Court of Appeals, is furnished forth-
with in accordance with Rule 38 of the Rules of this Court.
The decision of the Court of Appeals appears in the record
at page 269.* The opinion of the trial court appears in
the record at page 120.

*Such decision also appears in advance sheets of the United States
Patent Quarterly, Vol. 87, No. 4, p. 116.

ER Lay IONIC bacteria eas ae NENA Ca aman ca
SEI Say IL OIE SE TE SST KEGEL LEE LE LSE ITI

SUMMARY AND SHORT STATEMENT.

1. Respondent, a Missouri corporation, by its petition
(R. 26) filed June 10, 1949, sought judicial sanction of
respondent’s cancellation of the patent license (R. 140)
granted to petitioner by respondent, an accounting for
royalties due prior to such cancellation, an accounting for
general damages resulting from the claimed infringement
subsequent to the cancellation of the license, and for an
injunction restraining infringement of claim 1 of the li-
censed reissue patent 21,301 in suit (R. 184).

2. Petitioner, an Illinois corporation, by its answer
(R. 31, 38) denied that the respondent was entitled to the
relief prayed for. In such answer the petitioner pleaded
(R. 40) that the court should not sanction respondent’s
cancellation of the license. This upon the grounds that
while the petitioner in good faith believed and claimed that
the devices which it is manufacturing did not come within
the license, petitioner was ready and able to pay royalties
on such devices should they be adjudicated as coming within
the scope of such license.

3. The trial court by its judgment (R. 157) granted
respondent the relief prayed for. Such judgment was af-
firmed by the Court of Appeals for the Seventh Circuit
(R. 276).

4. The license referred to above was entered into De-
cember 7, 1939 as a settlement of the litigation instituted
July 11, 1939 by respondent’s complaint (R. 2) charging
petitioner with infringement of respondent’s patent 2,094,-
788 (R. 176).

5. By the terms of such license, respondent granted to
petitioner, in consideration of a royalty, the right te

CASEMENT IH, RPT AS WIN eS EY 2 ANCIENT

3

manufacture rejectors under its patent 2,094,788. By such
license, petitioner in turn granted to respondent a royalty-
free license under its patent, charged by petitioner in its
answer (R. 17) to respondent’s 1939 complaint (R. 2) to
be infringed by respondent.

§. The license provided that:

“TX, If either party hereto shall fail to perform any of
its obligations herein prescribed, then the aggrieved
party shall have the right to terminate this agreement
in so far as it affects the defaulted party, upon giving
to the defaulting party ninety days’ written notice
to that effect; however, if the defaulting party makes

good the breach within said ninety days, then this
agreement shall continue as though no default had

taken place.’’ (R. 142.)

7. The litigation initiated by respondent’s 1939 com-
plaint (R. 2) was terminated on December 7, 1939, by the
entry by the trial court below of a consent decree (R. 23),
stating an agreement of the parties with respect to the
validity and infringement of respondent’s patent 2,094,788
and petitioner’s patent 2,159,117.

8. After the filing of respondent’s 1939 complaint and
prior to the entry of such consent decree, and without the
knowledge of the petitioner and the trial court, respondent
surrendered to the Commissioner of Patents its patent
2,094,788 with an application (Def. Ex. 10) for a reissue
of such patent.

9. In such reissue application, in addition to reproduc-
ing the specification, drawings, and claims of Patent 2,094,-
788, the patentees unsuccessfully sought additional claims
which were not limited, as were the original patent claims,
to a ‘‘means for successively operating’’ a scavenger plate
and wiper blade.

10. The reissue patent (R. 184) which issued on Decem-
ber 19, 1939, by its specification discloses and claims a slug

; Spe Ae ee rege aie Hee SLI PIR REO TE .
ye et Se IRE RET IO ae FRED IEE I LN I RT IRI LS RL NR x —

4

rejector* having a scavenger plate carrying a coin track,
a magnet for arresting slugs on the track, and means for
successively operating the plate and a wiper blade, to move
the track from beneath the arrested slug before the blade
is moved to wipe such slug from the magnet.

11. Petitioner’s first knowledge of the issuance of such
reissue patent was as a result of respondent’s letter of
January 6, 1940 (R. 43), asking petitioner to interpret the
granting clause (R. 141)** of the license as extending to the
subsequently issued reissue patent. This the petitioner
did (R. 43). No corresponding change or modification was
made with respect to the consent decree.

12. Prior to the license, petitioner manufactured the
slug rejectors charged by respondent’s 1939 complaint to
infringe original claim 1 of Patent 2,094,788. Such rejec-
tors included a means for simultaneously operating a scav-
enger plate and wiper blade. This resulted in the move-
ment of the plate and blade not only simultaneously with
respect to each other but also simultaneously with respect
to an arrested slug.

13. Under the license and until petitioner’s business
was interrupted by World War II restrictions, petitioner
manufactured and paid royalties on rejectors, which, unlike
the rejectors charged by respondent’s 1939 complaint to
infringe original claim 1 of Patent 2,094,788, embodied a
means for successively operating a scavenger plate and
wiper blade. This resulted in the coin track being moved
from beneath the arrested slug before inovement was im-

*A slug rejector is a device used in coin-controlled machines and
its principal function is to segregate genuine coins from spurious
coins and tokens.

**“ TIT. National hereby by this agreement grants unto A. B. T.
a non-exclusive license and right to manufacture, sell and use coin
selectors embodying the patentable features shown, described and
claimed in the National Patent No. 2,094,788, the said license to be
for the full term of the said National patent.’’

5

parted to the wiper blade to wipe such slug from the

magnet.

14. After the lifting of war restrictions, and with re-
spondent’s knowledge (R. 45), petitioner engaged in the
manufacture and sale of the rejectors on which respondent
by its letter of September 24, 1947 demanded the payment
of royalties. Such rejectors embodied the scavenger plate
and wiper blade operating means emvodied in petitioner’s
rejectors charged by respondent’s 1939 complaint to in-
fringe patent 2,094,788.

15. Petitioner did not pay royalties on rejectors manu-
factured by it after the lifting of war restrictions. This
because petitioner believed and claimed that the patentees
by their reissue oath* and their acquiescence** in the re-
jection of claims not limited to rejectors having means for
successively operating the scavenger plate and wiper blade
were estopped from claiming, as respondent did in 1939
with respect to infringement of claim 1 of the original
patent 2,094,788, that rejectors embodying a means for
simultaneously, instead of successively, operating a scav-
enger plate and wiper blade were within the scope of re-
issue claim 1.

*In their oath filed as a part of the application for the reissue
patent in suit, the patentees averred :

“Ty all of the claims of said patent, limitations are included
whereby a certain movable plate and a certain movable blade
must be operated by certain means successively. The invention
may be constructed and embodied in such manner that such
successive operation is not necessary, and to this extent the
specification is defective or insufficient in failing to claim the
invention in terms not limited to such suecessive operation.
Claims 6, 7 and 8 of this reissue application, as presented here-
with, are not limited to such successive operation.’’ (Emphasis
briefwriter’s. )

**By reissue application claims 6 and 7, the patentees unsuccess-
fully sought to obtain claims, which unlike original claim 1, were not
limited to devices having means for successively operating a scav-
enger plate and a wiper blade.

2A a TS ee NR eT — - -
a hy Behe A nee CLITA OR PRATT, PY MATAR CES NDNA LORRI SORE APR OBST AT ROR

6

16. The trial court below concluded, and the Court of
Appeals in this case affirmed, that as the result* of the
operation of the plate and blade of petitioner’s rejectors
manufactured after the lifting of war restrictions, was the
same as that of petitioner’s rejectors made by it before
the issuance of the reissue patent and charged by respon.
dent’s 1939 complaint to infringe original claim 1 of patent
2,094,788, petitioner was estopped by the 1939 consent
decree (R. 23) to claim that such rejectors manufactured
by it after the lifting of war restrictions did not infringe
reissue claim 1, the Court of Appeals saying (R. 272):

‘‘Inasmuch as original claim 1 with its original
limitations has been preserved in the reissue patent
without change, no estoppel can grow out of the
reissue in so far as this claim is concerned. In this
situation it seems perfectly obvious that defendant
is fully bound by the doctrine of res adjudicata as to
all parts of the original judgment, which included a
finding that claim 1 of the original patent, which is
the same claim now before us, was valid and infringed.
And this defendant recognized by its consent to the
judgment, by taking a license to manufacture and by
its later agreement that the license applied to the
reissue patent. Being the same claim of the same
patentee which has been adjudged, as between the
parties, valid and infringed, the District Court prop-
erly decided that defendant is fully bound under the
doctrine of res adjudicata.,’’

17. Having received no royalties on such rejectors, re-
spondent by its letter of September 9, 1948 (R. 45) de-
clared petitioner in default of the license. In such letter

* The trial court held, and the Court of Appeals in this case
affirmed, that the petitioner’s rejectors responded to the ‘‘means
for successively operating a movable plate and a movable blade’’
of the combination of reissue claim 1, because the result of the opera-
tion of the scavenger plate and wiper blade of petitioner’s rejectors
was the movement of the track carried by the plate from beneath
the arrested slug before the blade contacted the slug to eject it from
arrested position.

7

respondent informed petitioner that unless such default
was cured within ninety days from the date of the letter,
the license would terminate. For reasons above stated,
petitioner did not pay the demanded royalties. There-
upon respondent filed its petition (R. 26) in the trial court
below. In such petition it sought, among other things, a
judicial sanction of the cancellation of the license.

18. Petitioner in its answer to such petition (R. 40)
pleaded that the court should not sanction respondent’s
cancellation of the license where, as here, the petitioner
in good faith believes and claims that the devices which
it is manufacturing do not come within the scope of the
license and petitioner offered in its answer to pay royal-
ties on such devices in the event they be adjudicated as
coming within the license.

19. With respect to this contention of the defendant
and in giving judicial sanction to respondent’s eancella-
tion of the license, the Court of Appeals in its opinion
(R. 275) said:

‘‘However, the circumstances of the case are not
such to persuade us that the court below erred in
declining to approve this contention of defendant.
Throughout the extended interval during which plain-
tiff claimed defendant was infringing defendant of
course might have made known its position by filing
a suit for declaratory judgment and depositing in
open court a conditional tender of royalties on all
devices claimed to infringe to await determination
of the court as to whether they did infringe. It knew
that plaintiff was insisting that it was infringing and
had given 90 days notice of termination. It took no
steps to protect itself. Furthermore, the court did
not forfeit the license; plaintiff did so, as it had a
right to do under the plain reading of the contract
of the parties. If defendant in good faith desired to
have the license contract continued it could have,
within the 90 days or even within six months there-

IR MB 2 an ix § . 9
PRR tg tpg CN Ne AAMT IE LO SE FEET ILRI TNS FEILER

qs Spree

lg ernst Sper as

8

after, taken proper steps to protect itself, as we have
indicated. We conclude that the District Court cor.
rectly disposed of the issue.’’

20. The reissue patent in suit dominates an entire jn.
dustry. Petitioner is the sole competitor of respondent
in the manufacture and sale of slug rejectors throughout
the United States. Respondent has granted no licenses
under the patent other than the one granted to petitioner,

JURISDICTION.

1. The decision of the Court of Appeals for the Sev-
enth Cireuit was rendered October 10, 1950 (R. 269).

9, A petition for rehearing was denied by the Court
of Appeals on November 9, 1950 (R. 277).

3, The jurisdiction of this Court is invoked under Sec-
tion 240(a) of the Judicial Code as amended by the Act
of February 13, 1925 (28 U. S. C. See. 347) and Section
5(b) of Rule 38 of this court.

4. Cases believed to sustain the jurisdiction are:

Rule 38, Section 5(b) reading: ‘‘Where a circuit
court of appeals has rendered a decision in conflict
with the decision of another circuit court of appeals
on the same matter; or has decided an important ques-
tion of local law in a way probably in conflict with
applicable local decisions; or has decided an import-
ant question of federal law which has not been, but
should be, settled by this court; or has decided a
federal question in a way probably in conflict with
applicable decisions of this court; or has so far de-
parted from the accepted and usual course of judicial
proceedings, or so far sanctioned such a departure
by a lower court, as to call for an exercise of this
court’s power of supervision.’’

Duplate Corp. & Pittsburgh Plate Glass Co. v.
Triplex Safety Glass Co. of North America,
298 U. S. 448.

Sheldon v. Metro-Goldwyn Pictures Corp., 309
U. S. 390.

Bacardi v. Domenech Treasurer, 311 U. 8S. 150.

United Carbon Co. v. Binney & Smith Co., 317
U. S. 228.

10

Williams Manufacturing Co. v. United Shoe Mfg.
Co., 316 U. S. 364.

Jacob Siegel Co. v. Federal Trade Commissioner,
327 U.S. 608.

Magnum v. Coty, 265 U. S. 597.

Aktieselskabet Cuzca v. The Sucarseco, 294 U, §,
394 at 399.

Baldwin v. Iowa State Traveling Men’s Associa.
tion, 283 U. 8. 522.

Schriber-Schroth Co. v. Cleveland Trust Co., 305
U.S. 47.

Exhibit Supply Co. v. Ace Patents Corp., 315
U. S. 126.

Muncie Gear Works v. Outboard Marine Mfg. Co.,
315 U. S. 759.

11

QUESTIONS PRESENTED.

——

1. Where the licensee under a patent, claims that
devices it is manufacturing do not come within the scope
of the license and for that reason has paid no royalties
on such devices, must such licensee to show good faith and
to protect itself against cancellation of the license by the
licensor

(1) file a suit for declaratory judgment to deter-
mine whether or not such devices come within the
scope of the license and

(2) also deposit in open court royalties on such
devices pending the disposition of such suit?

2, Should a court sanction a licensor’s cancellation of
a patent license for failure to pay royalties where the
licensee, with the licensor’s knowledge, claims that de-
viees which it is manufacturing do not come within the
scope of the license and in its answer to the licensor’s peti-
tion for judicial cancellation of the license, offers to pay
royalties on such devices, should contrary to the licen-
see’s claim, such devices be adjudicated within the license?

3. Where by a consent decree the parties acknowledge
the validity and infringement of only an original patent,
is the issue of validity and infringement of a subsequently
issued reissue of such original patent, in which the specifi-
cation, drawing, and claims of the original patent are
reproduced, res adjudicata as between the parties by rea-
son of such consent decree?

4. Did the Court of Appeals in this case, in holding
that because the result of the operation of petitioner’s
devices was the same as that of the device of reissue claim
1, apply the proper test of infringement?

SLEEPLESS ITT, MATRA BE EI I ME TAL TL a ee aN

12

REASONS RELIED UPON FOR ALLOWANCE OF
THIS PETITION.

-__e

Your petitioner contends that a writ of certiorari should
be allowed by this Court because:

1. By its decision in this case the Court of Appeals
has laid down an important rule of law of first impression
respecting the rights of a licensee under a patent in its
claim that devices which it is manufacturing and selling
do not come within the license; a rule of law which is far-
reaching in its effect because it affects without exception
every holder of a patent license.

2. The Court of Appeals in this case has laid down a
rule of law of first impression, in holding that a licensee
who claims that devices which it is manufacturing and
selling do not come within the scope of the license and
for that reason has paid no royalties on such devices,
must, in order to show good faith and to protect itself
against cancellation of the license by the licensor,

(1) file a suit for declaratory judgment to deter.
mine whether such devices come within the license, and

(2) tender into court royalties on such devices
pending such suit.

3. Because of the novelty and the far-reaching effect
of such question, it is of paramount importance that
this Court approve or disapprove such new and _ here-
tofore unheard of rule. Such question will constantly
arise in patent litigation. This Court should therefore
pass upon such question now and thereby establish an
acceptable rule of law to be followed by all Federal courts.

13

4. The question whether the validity and infringement
of a reissue patent is res adjudicata between the parties
by virtue of a consent decree entered into prior to the
issuance of the reissue patent and stating an agreement
with respect to the validity and infringement of only the
original patent, is an important question of first impres-
sion, it having never been passed upon by this or any other
Court.

5. It is of paramount importance to every member of
the public dealing with patents that this Court approve or
disapprove the radical departure by the Court of Appeals
in this case from the heretofore established rule that the
scope of a consent decree must be determined from the
decree itself and that such ecree cannot be modified
without the mutual consent of the parties.

6. The reissue patent in suit dominates an entire in-
dustry. The question whether the validity and infringe-
ment of such patent is res adjudicata between the parties
by virtue of a consent decree entered into prior to the
issuance of such reissue patent and stating an agreement
with respect to the validity and infringement of only the
original patent, is one of great importance. This by rea-
son of the fact that such question affects without excep-
tion every party who consents to the validity and infringe-
ment of an original patent. Such question will constantly
arise in patent cases. This Court should therefore pass
upon such question and thereby establish an acceptable
rule of law to be followed by all Federal courts. _

7. The Court of Appeals in this case by its decision
in holding petitioner’s devices infringement of reissue
claim 1, has applied a test of infringement which is con-
trary to the decisions of this Court and Courts of Appeals
of other circuits.

14

Wuererorg, it is respectfully submitted that this peti-
tion for writ of certiorari to the Court of Appeals for
the Seventh Circuit should be granted.

Respectfully submitted,

A. B. T. Manuracturine Corporarioy,
Petitioner,

By Cuarence EK. THreepy,
Its Attorney.

15

IN THE

Supreme Court of the United States

OcroBer TERM, 1950.

SR

A.B.T. MANUFACTURING CORPORATION,
Petitioner,
VS.

NATIONAL REJECTORS, INC.,
Respondent.

BRIEF IN SUPPORT OF PETITION FOR WRIT OF
CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE SEVENTH CIRCUIT.

To the Honorable the Chief Justice of the United States
and the Associate Justices of the Supreme Court of the
United States:

The decision of the Court of Appeals for the Seventh
Cireuit now sought to be reviewed was entered October
10, 1950 (R. 269).

Jurisdiction of this Court is invoked under Section 240(a)
of the Judicial Code as amended by the Act of February
13, 1925 (28 U. S. C. See. 347) and Sec. 5(b) of Rule 38
of this Court.

16

STATEMENT OF THE CASE.

To avoid repetition, reference is hereby made to the
statement on pages 2 to 8, supra, of the Petition for Writ
of Certiorari.

SPECIFICATION.

The following are the alleged errors of the Court of
Appeals for the Seventh Circuit which will be urged before
this Court:

1. The Court of Appeals erred in sustaining the find-
ing and conclusion of the trial court sanctioning and de-
claring the license agreement cancelled by respondent's
letter of September 9, 1948.

2. The Court of Appeals erred in affirming the finding
and conclusion of the trial court that the issues of validity
and infringement of the claims of a reissue patent are res
adjudicata by virtue of a prior consent decree stating an
agreement with respect to the validity and infringement
of the claims of only the original patent.

3. The Court of Appeals erred in finding that defend-
ant’s accused devices infringe reissue claim 1.

ARGUMENT.

Pornt I.

Respondent by its patent dominates an entire industry.
Petitioner is the sole competitor of respondent in the man-
ufacture and sale of slug rejectors throughout the United
States. No license other than the one granted to petitioner
has been granted by respondent under such dominating
patent.

By its letter of September 9, 1948 (R. 45) respondent
declared petitioner in default of its license (R. 140) be-

17

cause of petitioner’s failure to pay to respondent royalties
on devices manufactured by petitioner since the lifting of
war restrictions. In such letter respondent informed peti-
tioner that unless petitioner within ninety days from the
date of the letter cured the default by paying the demanded
royalties, the license would terminate. Because petitioner
believed and, with respondent’s knowledge (R. 45) ap-
proximately three years prior to the date of such letter,
claimed that such devices did not come within the scope of
the patent license, petitioner did not pay the demanded
royalties.

The Court of Appeals, upon respondent’s petition filed
one year after the date of such letter, gave judicial sanc-
tion (R. 275) to respondent’s cancellation of the patent
license. This notwithstanding that petitioner by its answer
(R. 40) te respondent’s petition offered to pay the de-
manded royalties should, contrary to petitioner’s claim
in tne above respects, it be adjudicated that such devices
were within the license (see Par. XIX of petitioner’s An-
swer, appearing in footnote below").

By its decision the Court of Appeals in this case has
given judicial sanction to a license under a patent dom-
inating an entire industry. It has laid down an important
rule of law of first impression respecting the rights of a
licensee under a patent in its claim that devices which it is
manufacturing and selling do not come within the license.

To petitioner’s knowledge, the Court of Appeals in this

*XIX. Defendant in further answer to plaintiff’s petition herein
states that while it has refused to pay to plaintiff royalties on slug
rejectors made and sold by defendant since on or about May 1945
because such slug rejectors do not infringe the claims of the reissue
patent No. 21,301, particularly claim 1 thereof, should it be finally
judicially determined, contrary to defendant’s position aforesaid,
that such slug rejectors do in fact infringe claim 1 of the said reissue
patent, defendant stands ready and is able to and will promptly pay
unto the plaintiff royalties on each of said slug rejectors at the rate
of royalty, to-wit, three cents (3¢) per slug rejector, provided for
in Paragraph IV of the hereinbefore referred to license agreement.

eyelets SAS ake Za PRCT S Te oa Lae i aa Ss RN ee RR atlas ei

18

ease has for the first time in the history of the law with
respect to patent licenses, laid down a rule of law requir.
ing a licensee
(1) to file a suit for declaratory judgment to deter.
mine whether or not devices which it is making and
selling come within the license and
(2) to deposit in open court pending such suit a
conditional tender of royalties on all of such devices
in order to show good faith in the licensee’s claim that
such devices do not come within the license and to protect
itself against cancellation of the license. Such a rule of
law is therefore one of first impression. Such fact con-
stitutes a special and important reason why this Court
should take jurisdiction under the general reserve of dis-
cretion indicated in Rule 38(5) of the Supreme Court
Rules.

In Sheldon v. Metro-Goldwyn Pictures Corp., 309 U. 8.
399 (decided March 1940), certiorari was granted by this
Court

‘‘in view of the importance of the question, which ap-

pears to be one of first impression in the application
of the copyright law.’’

See also Bacardi Corp. v. Domenech Treasurer, 311 U.S.
150 (decided December 9, 1940; United Carbon Co. v. Bin-
ney & Smith Co., 317 U. S. 228 (decided December 7, 1942);
Williams Manufacturing Co. v. United Shoe Mfg. Co., 316
U.S. 364; Jacob Siegel Co. v. Federal Trade Com missioner,
327 U. S. 608 (decided March 25, 1946).

Furthermore, the question whether a court should give
judicial sanction to a licensor’s cancellation of a license
under the above circumstance, is one of great importance
to every holder of a patent license. It is a question that
will constantly arise in future patent license cases. It af-
fects without exception every licensee of a patent license.

19

Furthermore, the decision of the Court of Appeals is
not only incompatible with the established authorities that
courts do not favor forfeiture,* but also has the effect of
securing for the licensor royalties on devices not covered
by the patent monopoly. This by reason of the fact that a
licensee may possibly elect to pay royalties on such de-
vices rather than comply with the rule announced by the
Court of Appeals in this case, by filing a petition for de-
claratory judgment to determine whether or not such de-
vices come within the scope of such license and by making
conditional tender of royalties pending determination of
such suit. This Court on numerous occasions has declared
that a patent monopoly cannot be extended beyond the
scope of the patent grant. Mercoid Corp. v. Mid-Continent
Investment Co., 320 U. S. 661.

As the new, novel and important questions presented
by this petition do not affect alone the parties to this liti-
gation, and as such questions will frequently arise in fu-
ture patent litigation, this Court should pass upon such
questions and thereby establish a uniform rule of law ap-
plicable to such questions and thereby furnish a guide for
Federal courts when confronted with such questions.

In Duplate Corp. é Pittsburgh Plate Glass Co. v. Triplex
Safety Glass Co. of North America, 298 U. S. 448 (decided
May 18, 1936), the Court granted certiorari

‘*to settle important questions as to the liability of
infringers.”’

*In Standard Dental Mfg. Co. v. National Tooth Co. (C. C. E. D.
Penna.), 95 F. 291 @ 294, the court said:

‘‘Forfeitures are not favored in equity, and the best considered
decisions hold that even licenses containing express stipulations
for their forfeiture are not, tpso facto, forfeited upon condition
broken, but remain operative and pleadable until rescinded by
a court of equity. 2 Rob. Pat. See. 822; White v. Lee, 3 F. 222;
Adams v. Meyers, 7 F. 208; Baker Mfg. Co. v. Washburn &
Moen Mfg. Co., 18 F. 172; Purifier Co. v. Wolf, 28 F. 814.”’

See to the same effect, Hartell v. Tilghman, 99 U. S. 547 @ 556.

i Tee veresef

20

notwithstanding the absence of conflict of decisions in dif.
ferent circuits.

In Aktieselskabet Cuzca v. The Sucarseco, 294 U. 8. 394
at 399, notwithstanding a lack of conflict of decisions, a
writ of certiorari was granted because of the novelty and
the importance of the question presented which had not
been decided by this Court. In that case, this Court said:

‘*Because of the importance of the question which

has not been decided by this court, a writ of certiorari
was granted.”’

If the novelty and importance of the question in the
cases referred to above, influenced this Court in granting
certiorari, it must with stronger reasons influence this
Court in the case at bar because of the character and
hereinbefore stated attendant effect of the opinion of the
Court of Appeals of the Seventh Circuit.

Petitioner is not soliciting, nor is it necessary that there
be, a retrial of the facts as are pertinent with respect to
the important question of first impression here presented.
Should this Court disapprove, as petitioner believes it
will, the aforesaid new and novel and harmful rule of law
laid down by the Court of Appeals, respondent would
be entitled only to an accounting for royalties. Such roy-
alties, as before stated, the petitioner stands ready and is
able to pay to respondent. Respondent would not be en-
titled to a cancellation of the license nor to an accounting
for damages for infringement nor to an injunction re-
straining infringement.

Upon the foregoing premises and in view of the undis-
puted fact that the respondent by its patent dominates an
entire industry, this Court is warranted in exercising its
discretionary power of granting the writ of certiorari
hereinbefore prayed for.

21

Pornr II.

The Court of Appeals in hoiding that the validity and
infringement of a reissue patent are res adjudicata between
the parties, by virtue of a consent decree entered into
prior to the issuance of the reissue patent* and stating an
agreement with respect to the validity and infringement
of only the original patent**, has decided a question which
is of great importance to the manufacturing public, par-
ticularly those dealing with patents. Such a rule is in-
compatible with the established rule of general law that the
scope of a consent decree must be determined by the de-
cree itself and that such decree cannot be modified in any
respects without the mutual consent of the parties to such
consent decree.

In People v. Spring Lake District, 253 Il. Supp. 479,
the Court said:

‘A consent decree is one based upon the consent
or agreement of the parties, which may supersede both
pleadings and evidence and even go to the extent of
pointing out and limiting the relief to be granted.
Such a decree is absolutely conclusive upon the con-
senting parties and cannot be amended or varied with-
out like consent, nor can it be reheard, appealed from,
or reviewed upon writ of error.’’

In City of Des Moines v. Des Moines Water Co., 218 F.
939 at 943, D. C. Iowa (affirmed 230 F. 570), the Court
said :

‘‘This order and everything in it was entered by
consent. In such cases, in the absence of fraud or

*At the time of entry of the consent decree in this case, neither
the trial court nor the petitioner had knowledge that respondent
had made application for the reissue patent.

**Upon application for reissue patent, the original patent is sur-
rendered to the Commissioner of Patents (see Rule 178 of the Rules
of Practice of the United States Patent Office).

WI We RRA

mistake, it cannot be modified or varied in any essen-
tial part without the consent of the parties to the
same.’’

The consent judgment (decree) is an agreement between
the parties to the litigation. The learned author Freeman
on Judgments (Sec. 1352, p. 2776, 5th Ed.), writes that a
court has no more authority to modify a consent judgment
than it would have to modify any other contract between
the parties.

In Steingruber et al. v. Johnson et al., 35 F. S. 622 at
663 (D. C. Tenn.), the Court said that it

‘“* * * is of the opinion that a consent judgment
cannot be amended, modified or corrected in any es-
sential particular except with the consent of all the
parties. If the court should in any way change,
amend, or alter the terms of a consent decree, it would

cease to be the agreement of the parties and would no
longer be a consent decree.’’

The question whether a consent decree stating an agree-
ment between the parties with respect to the validity and
infringement of only an original patent is res adjudicata
between the parties as to the validity and infringement of
a subsequently issued reissue patent, is one of first im-
pression and of great importance. Neither this nor any
other Court has ever passed upon such question.

The decision of the Court of Appeals herein is the first
in the history of patent law, to petitioner’s knowledge, to
extend a consent decree stating an agreement with respect
to the validity and infringement of only an original pat-
ent, to encompass a reissue of such original patent upon
the theory that such consent decree extends to such re-
issue patent because the specification, drawings and claims

23

of the original patent were reproduced in the reissue pat-
ent.*

The question is of great importance because it affects
without exception every consent decree in which the valid-
ity and infringement of only an original patent has been
or may be acknowledged.

The radical departure by the Court of Appeals from the
established rule of law that a consent decree cannot be
modified without the mutual consent of the parties, coupled
with the fact that the novel question presented is one of
first impression and of great importance to the public,
particularly those dealing with patents, justifies this Court
in exercising its discretionary power of granting a writ
of certiorari.

In Baldwin v. Iowa State Traveling Men’s Association,
Case No. 445, decided May 18, 1931, 283 U. S. 522, this
Court reviewed the novel question concerning the applica-
tion of res adjudicata on the question of jurisdiction over
the person of the defendant in the court which entered the
judgment.

In Sheldon v. Metro-Goldwyn Pictures Corp., 309 U. S.
390 (decided March 1940), certiorari was granted by this
Court

‘‘in view of the importance of the question, which ap-
pears to be one of first impression in the application
of the copyright law.’’

See also Bacardi Corp. v. Domenech Treasurer, 311 U. S.
150 (decided December 9, 1940) ; United Carbon Co. v. Bin-
ney & Smith Co., 317 U. S. 228 (decided December 7, 1942) ;

*The original patent and the reissue patent are two different
patents. The original patent and the reissue patent have different
_file wrappers. The validity and infringement of the claims of the
reissue patent involve for determination questions not involved in
the determination of the validity and infringement of the original
claims. Frink Co., Inc. v. Erikson, 20 F. 2d 707 at 712 (C. A. 1).

24

Williams Manufacturing Co. v. United Shoe Manufactur-
ing Co., 316 U. 8. 364; Jacob Siegel Co. v. Federal Trade
Commissioner, 327 U. 8S. 608 (decided March 25, 1946).

Pornt ITI.

The Courts below held petitioner’s rejectors to infringe
reissue claim 1 because the result* of the operation of
petitioner’s rejectors was the same as that of the device of
reissue claim 1. It failed to consider the structural differ-
ences between such devices. In so doing, it is petitioner’s
belief that the Courts below having predicated infringe-
ment upon a mere showing of results, have departed from
the established test of infringement as laid down in Sani-
tary Refrigerator Co. v. Winters, 280 U. S. 30; Machine Co.
v. Murphy, 97 U. S. 120 at 121; Stoehrer €& Platt Corpora-
tion v. Lusse Bros., 7 F. 2d 87 at 88 (C. A.3); Anakin Lock
Works v. Dillon Lock Works, 292 F. 45 (C. A. 8); Craft
Tint Mfg. Co. v. Baker, 94 F. 2d 369 (C. A. 9); Ruth v.
Climax Molybdemum Co., 93 F. 2d 699 (C. A. 10).

The Court of Appeals by its decision in this case has
held a patent which dominates an entire industry, as being
infringed because of the mere fact that the accused device
accomplishes the same result as that accomplished by the
claimed device. As petitioner is respondent’s sole com-
petitor in the manufacture and sale of slug rejectors, a
conflict of decisions of Courts of Appeals of different cir-
cuits, is improbable. (See affidavit of William Patzer ap-
pearing in the Appendix hereof.) In such a situation, it is
highly improbable that this Court would ever have the op-

*The trial court held, and the Court of Appeals in this case af-
firmed, that the petitioner’s rejectors responded to the ‘‘means for
successively operating a movable plate and a movable blade’’ of the
combination of reissue claim 1, because the result of the operation
of the scavenger plate and wiper blade of petitioner’s rejectors was
the movement of the track carried by the plate from beneath the
arrested slug before the blade contacted the slug to eject it from
arrested position.

25

portunity to resolve conflicting decisions of Courts of Ap-
peals of different circuits. In view of such situation and
the great importance of the questions presented, this Court
under the authorities of Schriber-Schroth Co. v. Cleveland
Trust Co., 305 U. S. 47; Exhibit Supply Co. v. Ace Patents
Corp., 315 U. S. 126 at 136; Muncie Gear Works v. Out-
board Marine Mfg. Co., 315 U. S. 759,* is fully justified
in granting the writ of certiorari as prayed for.

WuerEForE, your petitioner prays that its petition be
granted, that the writ of certiorari be issued and the case
reviewed, and the judgment of the Court of Appeals re-

versed.
Respectfully submitted,

A.B.T. Manuracrurinc CorPoRATION,
Petitioner,

By Cuarence KE. THreepy,
Its Attorney.

*In the Muncie case, supra, this Court said:
‘‘While there was no conflict of decision with respect to these
claims, we granted certiorari in view of the question pre-
sented and because the patent dominates a substantial portion
of an industry so concentrated in the Seventh Circuit that
litigation in other circults, resulting in a conflict of decisions,
is unlikely.”’ (citing Schriber-Schroth Co. v. Cleveland Trust
Co., supra).

BRE RAI RR EE CF ENO EIA LY LT PEI OE BY EESTI SANE

ae

Met wired at eat Teas PARROT ay

Te ere ep Rie
Se iceman

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27

APPENDIX.

ed

AFFIDAVIT OF WILLIAM PatTzer.

State OF ILLINOIS, a
County oF Cook. ,

I, William Patzer, being duly sworn, depose and say that
Lam of legal age, a resident and citizen of the City and
State aforesaid and president of the petitioner company,
AB.T. Manufacturing Corporation; that I am now and
have been for a period of more than twenty years, engaged
and associated with the manufacture of slug rejectors for
use by the vending machine industry; to the best of my
knowledge and belief the respondent has granted no licenses
under the patent in suit, No. Re-21,301, other than the
license granted to petitioner; that petitioner is the sole
competitor of respondent in the manufacture and sale of
slug rejectors of the type involved in this litigation.

Further affiant sayeth not.

Wiuiam Patzer.

SusscriBED AND sworn to before me this .......... day of
November, 1950.

Notary Public.

PS SN Ie RN NR VETS SB RIS NAP SERS TNR OE tte

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386417_0448%3A1. Public record. Not legal advice.