Gray Co. v. Alemite Corp.

174 A. 136, 20 Del. Ch. 244, 1934 Del. Ch. LEXIS 63
CourtCourt of Chancery of Delaware
DecidedJuly 13, 1934
StatusPublished
Cited by17 cases

This text of 174 A. 136 (Gray Co. v. Alemite Corp.) is published on Counsel Stack Legal Research, covering Court of Chancery of Delaware primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Gray Co. v. Alemite Corp., 174 A. 136, 20 Del. Ch. 244, 1934 Del. Ch. LEXIS 63 (Del. Ct. App. 1934).

Opinion

The Chancellor:

This suit is concerned with a con- > troversy arising out of certain agreements between the complainant (herein referred to as Gray) and the defendant (herein referred to as Al emite) touching license rights under patents to manufacture and- sell lubricating equipment. The bill also sets up a ground of complaint against the defendant of unfair competition in trade and trade libel and slander in violation of the agreements above mentioned.

Prior to 1932 Gray and Alemite were engaged in competition as manufacturers and vendors of lubricating equipment under patents and applications for patents respectively owned or controlled by them. The nature of the equipment is described in the bill. It is not necessary for the purpose of this case to describe it. Numerous patents have been issued and applications for patents made, covering types and features of the sort of lubricating equipment the parties here are engaged in manufacturing and marketing. These patents and applications appear to be owned [247]*247principally by three corporations. They are the complainant, the defendant, and Lubrication Corporation, a corporation of Delaware (hereinafter referred to as Lubrication). The patents and applications owned by Lubrication are over ninety in number and may be grouped under the general name of “Standix” patents.

Prior to 1932 Alemite sued Gray for infringement of patents in the District Court of the United States for the District of Minnesota, Fourth Division. After the case was heard but before decision, Alemite and Gray settled their differences. The settlement not only composed past differences and the then pending suit, but embodied an arrangement for the future whereby Gray became the licensee of Alemite to manufacture and, sell equipment covered by the latter’s patents.

The settlement was embodied in a written license agreement dated April 22, 1932. The terms of that agreement need not be set out in full. For the purposes of this case it is sufficient to say that by the agreement Alemite, subject to the conditions and limitations therein stated, granted to Gray

“The non-exclusive right and license under the aforesaid United States Letters Patent and under any other United States Letters Patent and patent applications now or hereafter owned or controlled by Alemite, and under which Alemite now has or may hereafter acquire the right and authority to grant a non-exclusive license such as is hereinelsewhere granted * * * to manufacture lubricant compressors, etc., * * * and to sell the said compressors, etc. * * *

It was further provided, inter alla as follows:

“Unless sooner terminated or cancelled by mutual consent, or in accordance with the provisions hereinabove expressly stated, this License Agreement and the non-exclusive license herein granted shall continue in full force and effect until the expiration of the latest United States Patent under which a license is herein granted.”

Gray was given the right at the time of making any [248]*248of the verified quarterly reports it agreed to make showing the volume of business done by it upon which the royalty of ten per cent, of Gray’s net selling price was to be calculated ' and paid, to elect to terminate the agreement and the non-exclusive license therein granted, termination to be effective at the expiration of the then current quarterly accounting period of three months and upon payment at that time of all earned and accrued royalties.

Alemite was not allowed to terminate the agreement and non-exclusive license therein granted, except upon the happening of certain conditions or defaults wholly within Gray’s control.

Thus Gray could elect to retire from the license agreement at any time, and Alemite had no such right of election.

The next agreement between Gray and Alemite was entered into on April 25, 1932. By that agreement Gray granted to Alemite a non-exclusive right and license to make, use and' sell lubricating equipment embodying the inventions described in the United States Letters Patent owned by Gray. Alemite agreed to 'pay to Gray royalties specified in the agreement. Alemite agreed to pay and did pay $107,500 in cash to Gray which sum was agreed by the parties to be paid on account of royalties yet to be earned. No further cash on account of royalties was to be paid by Alemite until the royalties due from it exceeded in the aggregate the said sum. Gray agreed to pay to Alemite the sum of $20,000 in monthly installments of $833.33 upon the happening of the contingency now about to be explained.

The contract recited that Alemite was then in negotiation with Lubrication for certain license or other rights under Lubrication’s so-called Standix patents “as a result of which said negotiation Alemite may subsequently be in a position to procure for or grant to Gray a more or less extensive license under the said Standix patents,” and that Gray desired to secure the benefits of a non-exclusive [249]*249license under the Standix patents. This recital is the background for one of the terms of the contract which is as follows:

“Alemite agrees that when and if it shall become possible for Alemite so to do, it will exhibit and offer to deliver to Gray a nonexclusive agreement granting Gray the right to manufacture and sell the compressor parts of lubricating systems or equipments under the said Standix patents, and under terms and conditions corresponding substantially or approximately, in so far as Alemite may be able to procure or extend them, with the terms and conditions of a certain license agreement * * * made and entered into between Alemite and Gray on the 22nd day of April, 1932 * * * and Gray agrees from and after Alemite’s exhibition and offer to deliver such a non-exclusive agreement under the said Standix patents, and between the 15th and 30th days of each month thereafter for a period of twenty-four months, to pay to Alemite the sum of Eight Hundred and Thirty-three Dollars and Thirty-three Cents ($833.33). * * * *” (The installments aggregate $20,000. This, sum the parties agreed Gray should pay to Alemite as. Gray’s proportionate part of the cost to Alemite of securing the Standix license.)

Thereafter Alemite by agreement dated July 7, 1932, obtained from Lubrication, in consideration of the payment of $450,000.00, an “exclusive right and license to make or have made, to use and/or to sell throughout the United States, * * * and the right without payment of additional royalty to export freely between the United States and Canada and from either or both thereof to any and all other countries, lubricating equipment” embodying the inventions described in the patents now owned “or hereafter owned or acquired by Lubrication, and/or under which Lubrication may now or hereafter acquire the right so to license Alemite.” This agreement further provided that Alemite should have the right at its election to extend to any or all of its present licensees a non-exclusive sub-license under the rights above mentioned as granted to it upon terms and conditions not inconsistent with those expressed in the agreement, terminable upon the termination of Alemite’s rights as licensee under the agreement. [250]

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Cite This Page — Counsel Stack

Bluebook (online)
174 A. 136, 20 Del. Ch. 244, 1934 Del. Ch. LEXIS 63, Counsel Stack Legal Research, https://law.counselstack.com/opinion/gray-co-v-alemite-corp-delch-1934.