Bickford v. John E. Mitchell Co.

595 F.2d 540, 202 U.S.P.Q. (BNA) 162
CourtCourt of Appeals for the Tenth Circuit
DecidedMarch 26, 1979
DocketNo. 77-1444
StatusPublished
Cited by15 cases

This text of 595 F.2d 540 (Bickford v. John E. Mitchell Co.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Tenth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Bickford v. John E. Mitchell Co., 595 F.2d 540, 202 U.S.P.Q. (BNA) 162 (10th Cir. 1979).

Opinion

STANLEY, Senior District Judge.

This appeal involves the interpretation of patent and royalty rights under a written contract between the plaintiffs-appellants, successors in interest of Magic-Vac Corporation and the defendant-appellee, John E. Mitchell Company.

The plaintiffs alleged that they were entitled to (1) the payment of additional royalties under the contract in the amount of $45,658.23, and (2) the reconveyance of certain patent rights and the Magic-Vac trademark which had been assigned to the Mitchell Company under the contract. The court, sitting without a jury, awarded plaintiffs $8,639.55 in additional royalties; determined that plaintiffs were not entitled to reconveyance of the patent rights, and that the trademark had reverted to plaintiffs on Mitchell’s termination of the contract. The court also denied plaintiffs’ claim for attorney’s fees.

The background facts will be set out in some detail.

F. E. Farley, one of the plaintiffs in this action, was the president and negotiator for Magic-Vac Corporation at the time the contract of sale was entered into. Magic-Vac was then manufacturing central unit vacuuming systems for home and professional use. The company was in some financial difficulty and these difficulties led to the sale of the assets of Magic-Vac to the Mitchell Company which also was engaged in the manufacture of vacuum cleaning units.

By the terms of the contract of sale the Magic-Vac stockholders were to be paid a five percent royalty on “each Magic-Vac cleaner and component parts sold by Mitchell” and “repair and replacement parts”.

At the same time that the corporation was sold, Farley signed on his own behalf another contract with the Mitchell Company. This was a personal employment contract whereby Farley was to receive $500 per month minimum salary plus a one percent commission on all items sold by him. Farley therefore received royalties as a 39 percent stockholder of Magic-Vac plus a one percent commission on sales.

Mitchell Company computed the royalties and Farley’s commission on the same gross sales figure from April 1962 until November 1963. It then became apparent to the Mitchell Company officers that the items on which the royalties were to be paid were not coextensive with the items on which Farley’s commission was based. The discrepancy arose because the Magic-Vac division of the Mitchell Company also manufactured and sold Handy-Wash and Handy-Mart, neither being a product acquired from Magic-Vac. Handy-Wash was a car washing unit installed in service stations. Handy-Mart was a large commercial refrigerator unit used for storage of convenience items such as sandwiches and beverages.

In an effort to avoid burdensome record keeping necessary to keep the two sales totals separate, Mitchell Company simply took 85 percent of the gross sales of the Magic-Vac division and paid the 5 percent royalty based on the resulting amount. This figure was arrived at by examining the ratio of “royalty sales” to Farley’s total sales over a period of several months. It was determined by the Mitchell Company that 85 percent of the total sales was a fair and accurate percentage on which to base the royalty payments.

The Mitchell Company implemented this method and used it from November 1963 until October 1970. From this latter date [543]*543until November 1972, the date the contract was terminated by Mitchell, the royalty was based on a sales figure which additionally excluded plastic pipe, flexible hoses and attachments such as brushes and crevice tools.

The trial court sustained the use of the 85 percent rule, rejecting plaintiffs’ argument that they were entitled to a royalty on all sales made by the Magic-Vac division. The court based its determination on its interpretation of the 1962 contract — that royalties were to be paid on “Magic-Vac cleaner and component parts” and “repair and replacement parts”, but not on Handy-Wash and Handy-Mart. The trial court further found that the Mitchell Company acted in complete good faith in implementing the 85 percent formula, and that plaintiffs had consented to its use by accepting the benefits of the formula since 1963.

However, the second reduction in the royalty base, the exclusion of flexible hoses, attachment tools, and plastic pipe, was determined to be unfair and these items were reinstated. The reinstatement of these items formed the basis for the $8,639.55 royalty payment awarded plaintiffs and the judgment in their favor has not been appealed by Mitchell.

The deposition of Farley was offered in evidence by the plaintiffs at the trial and was admitted after representation by counsel that he was then physically unable to appear. After judgment was entered and after the findings and conclusions were filed the plaintiffs moved for a new trial or alternatively to re-open the case to permit Farley to testify. Denial of the motion is assigned as error.

Rule 59(a)(2), Fed.R.Civ.P., provides in part that

On a motion for a new trial in an action tried without a jury, the court may open the judgment if one has been entered, take additional testimony, amend findings of fact and conclusions of law or make new findings and conclusions, and direct the entry of a new judgment.

Motions of this nature are addressed to the sound discretion of the trial court and a denial will be disturbed only when clearly erroneous. Kizziar v. Dollar, 268 F.2d 914 (10th Cir. 1959), cert. denied, 361 U.S. 914, 80 S.Ct. 258, 4 L.Ed.2d 184.

Plaintiffs did not move for a continuance or request leave to present additional evidence by further deposing Farley. In light of the plaintiffs’ failure to utilize these available alternatives, the court was well within its discretion in denying plaintiffs’ motions. See Muhammad Temple of Islam v. City of Shreveport, La., 387 F.Supp. 1129 (W.D.La.1974), aff’d, 517 F.2d 922 (5th Cir. 1975).

The second issue raised is whether the trial court committed reversible error in holding that the two patent applications conveyed to Mitchell were of no value and that Mitchell was therefore not obligated to reconvey these to the plaintiffs. By the terms of the contract two patent applications were assigned to Mitchell — patent application No. 48,663 in the name of Rex S. Hayes, filed October 19, 1960, and patent application No. 120,873 filed June 15, 1961 in the name of Rex S. Hayes. Plaintiffs offered evidence in the form of testimony by Mr. Bickford, a C.P.A. and one of the plaintiffs in this action, that the patents were worth approximately $180,000. This figure was based on the average of two computations made by Mr. Bickford. The first involved computations of the royalties received by plaintiffs over the previous five years which was projected over the remaining life of the patent, amounting to $200,-000. The second figure offered by Mr. Bickford was $160,000 which resulted from the method of valuation used by the IRS. According to Mr. Bickford’s testimony this method involved the use of the life of the patent on which royalties were paid, 1966 through 1972, which was then discounted by 17 percent and projected over the remaining life of the patent.

In an effort to rebut this testimony concerning the value of the patents in question, Mitchell requested that one of its attorneys, Mr.

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Bickford v. John Mitchell Company
595 F.2d 540 (Tenth Circuit, 1979)

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Bluebook (online)
595 F.2d 540, 202 U.S.P.Q. (BNA) 162, Counsel Stack Legal Research, https://law.counselstack.com/opinion/bickford-v-john-e-mitchell-co-ca10-1979.