McEVOY CO. v. KELLEY et al., 171 F.2d 837

HOLMES, Circuit Judge. The appellees are owners of letters patent upon a device, known as Rotary Slip Lifter, and have filed application for a patent covering certain improvements thereon. On July 25, 1945, the appellees granted .appellant a license to make, use, and sell the device covered by the patent. The agreement was in writing, and is in the record. It provides for payment to appellees by the appellant of certain minimum royalties.

This suit was filed by appellees against appellant to recover damages for failure to pay such royalties from July 1, 1946, to January 25, 1947, the date of termination of the agreement. The sole question on this appeal is whether under the wording of the agreement, and upon the undisputed facts, the appellant is liable for such minimum royalties. The case was tried by the court without a jury, judgment being rendered for the plaintiffs below, appellees here. The appellant, defendant below, as Licensee of the patent, terminated the agreement.

If the agreement had been terminated by the Licensors, we would have an entirely different question to decide, because the contract makes a separate and specific provision for each contingency. Part one provides that, if the Licensors terminate the contract because of a breach thereof by the Licensee, such termination shall be the Licensors’ sole .remedy for such breach; but

part XII provides that, if the Licensee terminates it, such termination shall not affect the Licensee’s obligation, to pay any royalty that may have accrued up to the time of such termination. The crucial question is: does “any royalty” include “minimum royalty”? The court below held that it did, and we think so too. The contract is long and complicated, consisting of fourteen printed pages containing twenty-one parts, or sub-divisions.

Decisions from other states construing different contracts, which were ■terminated under different circumstances,, are not controlling or even persuasive here,, where the question is what the parties intended by, and what was done by them under, this contract. Their intention must be gotten from the plain language of the written instrument, and the circumstances surrounding the parties at the time it was made. A valid contract may stipulate the legal rights and liabilities of the parties upon its breach, and that is what this contract undertook to do.

The appellant seems to predicate its entire appeal upon the provision of the contract as to the rights of the Licensors to terminate such agreement upon the failure of the Licensee to pay the stipulated royalties, actual or minimum, and the effect of the exercise of that •right.

The fallacy of this contention lies in the undisputed fact that the contract was not terminated by the Licensors but by the Licensee, in (which event the applicable provision of the contract reads as 'follows: “Should this agreement be terminated by Licensee, such termination shall not affect Licensee’s obligation to pay any royalty that may have accrued up to .the time of such termination, and Licensee agrees to pay Licensors the agreed royalty on all devices covered by any pending application or Letters Patent subject to this agreement then in process of manufacture or then manufactured and in stock, in accordance with the terms hereof, when and as used or sold by Licensee.” The appellant, having retained its rights as Licensee under the contract until sixty days after November 25, 1946, and the Licensors not having terminated the agreement,. the trial court did not err in rendering a money judgment in 'favor of the plaintiffs -for minimum royalties covering the period of time during which the Licensee kept its licensing rights.

The judgment appealed from is Affirmed.