Friedman v. Manfuso

620 F. Supp. 109, 226 U.S.P.Q. (BNA) 978, 1985 U.S. Dist. LEXIS 22307
CourtDistrict Court, District of Columbia
DecidedFebruary 25, 1985
DocketCiv. A. 83-2741
StatusPublished
Cited by5 cases

This text of 620 F. Supp. 109 (Friedman v. Manfuso) is published on Counsel Stack Legal Research, covering District Court, District of Columbia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Friedman v. Manfuso, 620 F. Supp. 109, 226 U.S.P.Q. (BNA) 978, 1985 U.S. Dist. LEXIS 22307 (D.D.C. 1985).

Opinion

MEMORANDUM OPINION

JUNE L. GREEN, Senior District Judge.

This matter is before the Court on cross-motions for partial summary judgment by plaintiff and defendant Alcon Laboratories, Inc. (“Alcon”), their respective oppositions thereto, the parties’ replies, and the entire record herein. For the reasons stated below, the Court grants defendant Alcon’s motion for partial summary judgment and denies plaintiff’s cross-motion.

On September 16, 1983, plaintiff Friedman brought this action for compensatory and punitive damages against defendant Alcon. Plaintiff thereafter amended the complaint to add defendant John A. Manfu-so, Jr. (“Manfuso”). 1 In his amended complaint, plaintiff alleged that he was not “fully and fairly” paid the royalties and other compensation due to him under a license agreement involving his invention of an electrode cream. Amended Complaint 111119-21.

Defendant Alcon filed a motion for partial summary judgment, contending that plaintiff could not recover on the majority of his claims because of either the applicable statute of limitations or the unconditional assignment of the patent and trademark rights. Plaintiff cross-filed for partial summary judgment, claiming that defendants fraudulently concealed their breach of the license agreement and thereby deprived plaintiff of the true value of his invention and the related patent and trademark rights.

*111 Statement of Facts

In February 1958, plaintiff Friedman entered into a license agreement with Burton Parsons Chemicals, Inc. (“Burton Parsons”), the predecessor in interest of defendant Alcon. 2 Under the agreement, Burton Parsons received exclusive rights to “manufacture, promote, sell and distribute” EKG Sol, an electrode cream invented by plaintiff, in exchange for the payment of royalties. Exhibit A HIT 2, 3 to Amended Complaint. The exclusive rights of Burton Parsons were to continue until the end of the patent term. In addition, the company received the right “to utilize and exploit Inventor’s trade-marks ... and to utilize Inventor’s secret processes, information and know-how concerning the manufacture of [the invention].” Id. ¶ 2.

In exchange, plaintiff received $2,500, plus seven percent of the first $20,000 of the company’s annual “net sales” and five percent of the “net sales” above $20,000. The payments were to be made quarterly and to include a statement of the “net sales” and “any other particulars necessary or material.” The agreement defined “net sales” as the gross selling price less customer discounts, returns, taxes, and freight. Id. 113.

The agreement permitted Burton Parsons to use affiliated corporations to sell and distribute EKG Sol. In that case, however, “net sales” was defined as sales “to the wholesale and retail drug market and shall not mean the sale of The Compound to [the affiliated corporation].” Id.

In addition, Burton Parsons received the right to grant licenses to manufacture EKG Sol for sale and distribution in foreign countries. If a manufacturing license were granted, plaintiff was to receive 30 percent of the royalties or other compensation paid to Burton Parsons by the foreign corporation. Id. II4.

The agreement required the company to maintain adequate records and gave plaintiff the right to inspect the books. Id. U 12. Plaintiff also reserved the right to inspect the company’s facilities to control the nature and quality of the product. Id. ¶ 9.

Plaintiff could terminate the agreement upon written notice if the company failed to pay any royalties within 60 days or otherwise breached the agreement. Id. ¶ 7. Likewise, the company could terminate the agreement if the manufacture of the invention became infeasible or undesirable for valid business reasons. Id. 118.

Upon execution of the license agreement, plaintiff had applied for, but had not received, the patents and registered trademark. In 1961, plaintiff assigned all his “right, title and interest” in the United States 3 and Canadian 4 patents for EKG Sol for ten dollars and one dollar, respectively. Exhibits 5, 7 to Statement of Points and Authorities in Support of Alcon’s Motion for Partial Summary Judgment (“Motion of Alcon”). Plaintiff also assigned the registered trademark 5 to Burton Parsons at that time for “good and valuable consideration.” Exhibit 9 to Motion of Alcon. None of the assignments explicitly mentioned the license agreement.

In April 1968, Burton Parsons informed plaintiff by letter that the method of computing his royalties on sales of EKG Sol in Canada was changed to conform with the “foreign licenses” provisions of the license agreement. Exhibit 10 to Motion of Alcon. The new royalty computation appeared on every quarterly royalty statement sent to plaintiff from 1968 through 1977. Defend *112 ant Alcon’s Statement of Material Facts as to Which There is No Genuine Issue (“Defendant Alcon’s Statement of Material Facts”) ¶ 5; see, e.g., Exhibit 12 to Motion of Alcon.

Another change in the computation of royalties occurred in November 1974. Burton Parsons began deducting each month 7.025 percent from the gross sales of EKG Sol in the United States before computing plaintiff’s royalty. The deduction was not noted on plaintiffs quarterly accountings, although it was set forth in the company’s books and records. Plaintiff’s Statement of Material Facts Not in Dispute (“Plaintiff’s Statement of Material Facts”) ¶ 4(b); Motion of Alcon at 7.

In September 1977, about one-and-a-half years before the expiration of the patent, Burton Parsons sold the EKG Sol product line and Canadian patent and trademark rights to Graphic Controls Corporation for $600,000. 6 Plaintiff’s Statement of Material Facts If 6. Prior to the closing of the sale, plaintiff accepted a one-time, lump-sum payment of $15,000 in full settlement of his remaining royalty rights under the license agreement. Defendant Alcon’s Statement of Material Facts ¶¶ 3-4; see Exhibit 15 to Motion of Alcon.

Defendant Alcon acquired Burton Parsons two years after the sale of the EKG Sol product and patent and trademark rights. Plaintiff and defendant Alcon never had any direct dealings prior to the initiation of the instant lawsuit. Defendant Alcon’s Statement of Material Facts ¶ 7.

Plaintiff claims that he was unaware of the 7.025 percent deduction until September 1982, when he was asked to testify in a case against Burton Parsons brought by another inventor for the identical discounting of sales. Plaintiff’s Statement of Material Facts ¶ 8. In July 1983, plaintiff demanded that defendants Alcon and Manfu-so pay to him all sums wrongfully withheld under the license agreement. Id. 119.

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Cite This Page — Counsel Stack

Bluebook (online)
620 F. Supp. 109, 226 U.S.P.Q. (BNA) 978, 1985 U.S. Dist. LEXIS 22307, Counsel Stack Legal Research, https://law.counselstack.com/opinion/friedman-v-manfuso-dcd-1985.