1 Reported in 233 N.W. 870.
After adverse findings and order for judgment its motion for a new trial was denied, and plaintiff appeals.
The action arises from a "patent pooling" contract of March 19, 1927. The patents involved covered automatic electric bread toasters and improvements thereto. One, known as the Rogers patent, was owned by plaintiff. Others, the "Strite patents," were owned by defendant Waters-Genter Company, hereinafter referred to as though it were the sole defendant. Its codefendant, Walter E. Johnson, can be more conveniently designated by his surname only. He was the third party to the contract for a purpose soon to be stated.
After reciting their ownership of the patents, the desire of plaintiff and defendant "to pool their rights to manufacture" under all of them and to have Johnson "handle the licensing of others," the contract assigned from plaintiff to defendant the Rogers patent and trademark rights. Next, defendant employed Johnson "as its royalty sales manager * * * to take complete charge of the licensing of others to manufacture and sell * * * in exclusive charge of negotiating and executing such license contracts."
By the agreement, but subject to its own approval, defendant authorized Johnson to enter into licensing contracts on its behalf "on the best royalty basis obtainable" in each instance. Defendant was prohibited from entering into any such contracts "except through Johnson and as herein specified." It was provided that "in the event that no licensing agreement" should be entered into by Johnson before March 1, 1928, "then this agreement shall be cancelled and the parties shall, as nearly as possible, restore each other to their status prior to the execution of this agreement." There are numerous other terms not now material. The thing presently decisive is that neither the form nor substance of the proposed licenses was agreed upon and none could be entered into Without, on the one hand, the approval of defendant, and on the other the procurement and consent of Johnson, who was plaintiff's representative. In that fashion plaintiff and defendant each reserved the right of
veto as against any licensing contract proposed or wanted by the other.
It may be assumed that Johnson endeavored with diligence to negotiate licensing agreements. He procured from a responsible corporation, which we shall call the Fitzgerald Company, the tender of one. But defendant refused its approval, and the proposed licensing contract was not made. There has been no other. So by its own terms the "patent pooling agreement" lapsed March 1, 1928, unless defendant was under an enforceable contractual obligation to approve the Fitzgerald contract as tendered. The principal relief wanted by plaintiff is a decree compelling (defendant to approve of and bind itself by that contract. It may be assumed that if such a decree were properly obtainable it could be made effective nunc pro tunc so as to give plaintiff the benefit of the Fitzgerald offer as of a tract prior to March 1, 1928, and thereby the lapse of the basic contract be prevented.
There is nothing about the subject matter of the main contract which puts it beyond the power of equity to compel specific performance. The difficulty is that were a judge to order what plaintiff asks he would be making a contract for the parties, rather than enforcing one already made by themselves.
The contract required, in respect to licensing agreements to be procured thereunder, only that they should be "on the best royalty basis obtainable in each instance." Plaintiff asserts that anything from 25 to 35 cents a toaster would be a reasonable royalty. Defendant put the figure much higher. The contract fixed no royalties and is equally silent as to terms involving other matters. Like a lease or contract for the sale of real estate, a patent licensing agreement may be very simple or very involved.
Some of the questions to be settled are these: Is the license to be assignable or not? Are the royalties to be "flat" or on a percentage basis? Is there to be one rate for one class of articles and another rate for another? If on a percentage basis, what, if any, trade discounts are to be deducted in determining the basis for computation of royalties? What shall be the terms of reporting,
accounting and payment? What right is licensor to have to examine and audit the books and other records of licensee in order to verify its reports of royalties? How are the articles to be trade-marked and advertised? What provision is to be made against infringement and concerning possible suits for infringement against licensor or licensee and the result of such litigation, favorable or unfavorable? How and for what default is the contract to be subject to cancelation? What, if anything, shall be included in the way of a price maintenance agreement, and how shall it be enforced? Shall a minimum production, or of sales and/or royalties be granted? If so, how much?
A form of licensing agreement, found in a recent work on patents, after the conventional recitals, proceeds in great detail with no less than 17 numbered subdivisions. 2 Walker, Patents (6 ed.) 1437. In any one of them can be found material for disagreement of such nature as easily to be an obstacle fatal to final accord. Yet it is just such a contract that the district court would have made for parties who themselves had not made it in order to allow plaintiff the relief sought by this action. However desirable it may sometimes seem on ethical grounds, equity has not yet assumed so far-reaching a power. The courts steadfastly refuse to make contracts for litigants. The most they can do is to enforce those already made.
It is a fundamental rule that specific performance will not be decreed unless the contract is certain and complete. The agreement must be free from doubt or ambiguity and "make the precise act which is to be done clearly ascertainable." 25 R.C.L. 218. "To be enforceable, a contract to enter into a future contract must specify all its material and essential terms, and leave none to be agreed upon as the result of future negotiations." Shepard v. Carpenter, 54 Minn. 153, 156,55 N.W. 906. That rule applies to contracts involving patents. Dalzell v. Dueber W. C. Mfg. Co. 149 U.S. 315, 13 S.Ct. 886,37 L. ed. 749. There is not enough elasticity in it to permit a decree requiring parties to enter into an involved contract, none of the terms or conditions of which have been agreed upon
contractually by themselves. That proposition is too familiar law to require authorities in support. But among those which have been cited to us are the following: Williams v. Stewart,25 Minn. 516; Holliday v. Hubbard, 45 Minn. 333, 47 N.W. 1134; Ham v. Johnson, 55 Minn. 115, 56 N.W. 584; Gruesuer v. Thatcher, 158 Minn. 470, 197 N.W. 968; Mercer v. Payne Sons Co. 115 Neb. 420, 213 N.W. 813 (where the court declined the job of formulating for parties who had not agreed upon its terms a lease of real estate); Mayer v. McCreery,
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1 Reported in 233 N.W. 870.
After adverse findings and order for judgment its motion for a new trial was denied, and plaintiff appeals.
The action arises from a "patent pooling" contract of March 19, 1927. The patents involved covered automatic electric bread toasters and improvements thereto. One, known as the Rogers patent, was owned by plaintiff. Others, the "Strite patents," were owned by defendant Waters-Genter Company, hereinafter referred to as though it were the sole defendant. Its codefendant, Walter E. Johnson, can be more conveniently designated by his surname only. He was the third party to the contract for a purpose soon to be stated.
After reciting their ownership of the patents, the desire of plaintiff and defendant "to pool their rights to manufacture" under all of them and to have Johnson "handle the licensing of others," the contract assigned from plaintiff to defendant the Rogers patent and trademark rights. Next, defendant employed Johnson "as its royalty sales manager * * * to take complete charge of the licensing of others to manufacture and sell * * * in exclusive charge of negotiating and executing such license contracts."
By the agreement, but subject to its own approval, defendant authorized Johnson to enter into licensing contracts on its behalf "on the best royalty basis obtainable" in each instance. Defendant was prohibited from entering into any such contracts "except through Johnson and as herein specified." It was provided that "in the event that no licensing agreement" should be entered into by Johnson before March 1, 1928, "then this agreement shall be cancelled and the parties shall, as nearly as possible, restore each other to their status prior to the execution of this agreement." There are numerous other terms not now material. The thing presently decisive is that neither the form nor substance of the proposed licenses was agreed upon and none could be entered into Without, on the one hand, the approval of defendant, and on the other the procurement and consent of Johnson, who was plaintiff's representative. In that fashion plaintiff and defendant each reserved the right of
veto as against any licensing contract proposed or wanted by the other.
It may be assumed that Johnson endeavored with diligence to negotiate licensing agreements. He procured from a responsible corporation, which we shall call the Fitzgerald Company, the tender of one. But defendant refused its approval, and the proposed licensing contract was not made. There has been no other. So by its own terms the "patent pooling agreement" lapsed March 1, 1928, unless defendant was under an enforceable contractual obligation to approve the Fitzgerald contract as tendered. The principal relief wanted by plaintiff is a decree compelling (defendant to approve of and bind itself by that contract. It may be assumed that if such a decree were properly obtainable it could be made effective nunc pro tunc so as to give plaintiff the benefit of the Fitzgerald offer as of a tract prior to March 1, 1928, and thereby the lapse of the basic contract be prevented.
There is nothing about the subject matter of the main contract which puts it beyond the power of equity to compel specific performance. The difficulty is that were a judge to order what plaintiff asks he would be making a contract for the parties, rather than enforcing one already made by themselves.
The contract required, in respect to licensing agreements to be procured thereunder, only that they should be "on the best royalty basis obtainable in each instance." Plaintiff asserts that anything from 25 to 35 cents a toaster would be a reasonable royalty. Defendant put the figure much higher. The contract fixed no royalties and is equally silent as to terms involving other matters. Like a lease or contract for the sale of real estate, a patent licensing agreement may be very simple or very involved.
Some of the questions to be settled are these: Is the license to be assignable or not? Are the royalties to be "flat" or on a percentage basis? Is there to be one rate for one class of articles and another rate for another? If on a percentage basis, what, if any, trade discounts are to be deducted in determining the basis for computation of royalties? What shall be the terms of reporting,
accounting and payment? What right is licensor to have to examine and audit the books and other records of licensee in order to verify its reports of royalties? How are the articles to be trade-marked and advertised? What provision is to be made against infringement and concerning possible suits for infringement against licensor or licensee and the result of such litigation, favorable or unfavorable? How and for what default is the contract to be subject to cancelation? What, if anything, shall be included in the way of a price maintenance agreement, and how shall it be enforced? Shall a minimum production, or of sales and/or royalties be granted? If so, how much?
A form of licensing agreement, found in a recent work on patents, after the conventional recitals, proceeds in great detail with no less than 17 numbered subdivisions. 2 Walker, Patents (6 ed.) 1437. In any one of them can be found material for disagreement of such nature as easily to be an obstacle fatal to final accord. Yet it is just such a contract that the district court would have made for parties who themselves had not made it in order to allow plaintiff the relief sought by this action. However desirable it may sometimes seem on ethical grounds, equity has not yet assumed so far-reaching a power. The courts steadfastly refuse to make contracts for litigants. The most they can do is to enforce those already made.
It is a fundamental rule that specific performance will not be decreed unless the contract is certain and complete. The agreement must be free from doubt or ambiguity and "make the precise act which is to be done clearly ascertainable." 25 R.C.L. 218. "To be enforceable, a contract to enter into a future contract must specify all its material and essential terms, and leave none to be agreed upon as the result of future negotiations." Shepard v. Carpenter, 54 Minn. 153, 156,55 N.W. 906. That rule applies to contracts involving patents. Dalzell v. Dueber W. C. Mfg. Co. 149 U.S. 315, 13 S.Ct. 886,37 L. ed. 749. There is not enough elasticity in it to permit a decree requiring parties to enter into an involved contract, none of the terms or conditions of which have been agreed upon
contractually by themselves. That proposition is too familiar law to require authorities in support. But among those which have been cited to us are the following: Williams v. Stewart,25 Minn. 516; Holliday v. Hubbard, 45 Minn. 333, 47 N.W. 1134; Ham v. Johnson, 55 Minn. 115, 56 N.W. 584; Gruesuer v. Thatcher, 158 Minn. 470, 197 N.W. 968; Mercer v. Payne Sons Co. 115 Neb. 420, 213 N.W. 813 (where the court declined the job of formulating for parties who had not agreed upon its terms a lease of real estate); Mayer v. McCreery, 119 N.Y. 434,23 N.E. 1045.
Pomeroy states that "for specific performance is demanded that degree of certainty and definiteness which leaves in the mind of the chancellor or court no reasonable doubt as to what the parties intended, and no reasonable doubt of the specific thing equity is to compel done. 'The element ofcompleteness denotes that the contract embraces all the material terms; that of certainty denotes that each one of these terms is expressed in a sufficiently exact and definite manner.' " 5 Pomeroy, Eq. Jur. (2 ed.) § 2186. See also Livingston Waterworks v. City of Livingston, 53 Mont. 1,162 P. 381. Other cases are collected in the annotation of this case in L.R.A. 1917D, 1074, 1079.
An attentive consideration of the cases cited for plaintiff confirms rather than disturbs the views above expressed. In Nichols, Shepard Co. v. Marsh, 61 Mich. 509, 514,28 N.W. 699, 701, the agreement enforced, the court said, "was perfectly definite in its terms." So also in Bijur Motor Lighting Co. v. Eclipse Machine Co. (C.C.A.) 243 F. 600, 605, the contract was complete and "clear." There was no obstacle to the court's ascertaining and by its decree enforcing just what the parties themselves and intended and expressed. In Fuller
Johnson Mfg. Co. v. Bartlett, 68 Wis. 73, 31 N.W. 747,60 Am.R. 838, the license was implied, that is, expressed by the conduct rather than any writing of the parties. But as found by the court, there was nothing fatally uncertain or incomplete about it. In Kearns-Gorsuch Bottle Co. v. Hartford-Fairmont Co. (D.C.) 1 F.2d 318, 320, the agreement enforced was "defendant's standard printed lease and license." That is, a
definite and complete form had been set up by the parties themselves.
It may be, as argued for plaintiff, that by reason of the contract and more particularly the part performance thereof, there has resulted a fiduciary relationship between plaintiff and defendant with the duties and obligations peculiar thereto. Ball Socket Fastener Co. v. Ball Glove Fastening Co. (C. C. A.) 58 F. 818. But, assuming that, it does not follow that by a decree of specific performance a court should compel the parties to assume the obligations of additional and new contracts to be made for them judicially rather than by themselves in the usual manner of contractual agreement. Neither this decision nor the judgment to be entered pursuant thereto will have any effect (beyond that of denying plaintiff's prayers for affirmative relief) upon the rights of the parties arising from part performance of the contract. The obligations, if any, resulting from that performance will not be prejudiced.
Order affirmed.
AFTER REARGUMENT.
On January 16, 1931, the following opinion was filed: