Hazeltine Research, Inc. v. De Wald Radio Mfg. Corp.

194 Misc. 81, 84 N.Y.S.2d 597, 79 U.S.P.Q. (BNA) 446, 1948 N.Y. Misc. LEXIS 3636
CourtNew York Supreme Court
DecidedDecember 10, 1948
StatusPublished
Cited by5 cases

This text of 194 Misc. 81 (Hazeltine Research, Inc. v. De Wald Radio Mfg. Corp.) is published on Counsel Stack Legal Research, covering New York Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Hazeltine Research, Inc. v. De Wald Radio Mfg. Corp., 194 Misc. 81, 84 N.Y.S.2d 597, 79 U.S.P.Q. (BNA) 446, 1948 N.Y. Misc. LEXIS 3636 (N.Y. Super. Ct. 1948).

Opinion

Hofstadter, J.

The plaintiff moves for summary judgment or, in the alternative, for an order striking out the affirmative defenses set forth in the defendant’s answer. On October 22, 1941, the defendant and the plaintiff’s predecessor entered into a license agreement which by its terms became effective July 1, 1941. Thereby the licensor granted to the defendant a personal, indivisible, nontransferable and nonexclusive license to utilize the patents therein described in the manufacture at the defendant’s factory, located at 436-440 Lafayette Street, New York City, of the radio equipment described in the agreement. Royalties measured by the gross sales are payable at the rate of 1.05% in respect of some and at the rate of 2.1% in respect of other radió equipment. The agreement is for the term of ten years, expiring on June 30, 1951, and provides for renewal at the option of the defendant for an additional term of three years. The defendant has not paid royalties since January 1, 1947. This action is brought to recover royalties for the period January 1 to December 1, 1947.

The moving affidavit alleges, without more, “ that defendant is utilizing inventions covered by patents granted to plaintiff and licensed to defendant.” The defendant’s answering affidavit denies the use by defendant at any time of valid patents of the plaintiff. In addition, the defendant alleges, without con[83]*83tradiction, that prior to the effective date of the agreement some of the patents licensed under it had already been held invalid and that other patents have since been held to be invalid. The agreement recites in part: ‘ ‘ Licensor represents that it owns or has the right to grant licenses under the United States patents enumerated in Schedule A * *

In a like action on a similar contract the plaintiff prevailed on an application for summary judgment (Hazeltine Research, Inc., v. Automatic Radio Mfg. Co., 77 F. Supp. 493). The parties to that action are not the same as the parties here. While the issues in the two actions are in many respects similar, they are not entirely the same. Moreover, as will appear, the questions involved are largely those of New York contract law, and on such questions this court is not bound by the Federal decision (People ex rel. Central Park North & East Riv. R. R. Co. v. Willcox, 194 N. Y. 383, 386; People ex rel. Rice v. Graves, 242 App. Div. 128, 134, affd. 270 N. Y. 498; Sadler v. Boston & Bolivia Rubber Co., 140 App. Div. 367, affd. 202 N. Y. 547; Grauer v. Equitable Life Assur. Soc. of U. S., 167 Misc. 30, 38). While the Federal decision has been given the most earnest consideration, it is not controlling and for the reasons to be stated I reach a contrary result on the motion for summary judgment.

It is clear that a determination with regard to the consideration supporting a contract is within the competence of this court, although the question may depend upon the validity of a patent or patents (Herzog v. Heyman, 151 N. Y. 587, 591, 592). The invalidity of a patent may result in a failure of consideration rendering a contract supported by it unenforcible, and this result follows regardless of the good faith of the licensor (Pomeroy v. New York Hippodrome Corp., 197 App. Div. 114; Buffalo Rubber Mfg. Co. v. Batavia Rubber Co., 90 Misc. 418). As already noted, it is uncontradicted that both before and since the execution of the license agreement some of the patents covered by it have been adjudged invalid. The defendant argues that the patents so declared invalid are the most important. If so, then their invalidity may be so essential as to defeat the whole purpose of the license agreement and bring about a failure of so substantial and vital a part of the consideration as to constitute a failure of consideration within the doctrine" of the authorities cited. (See Jacob & Youngs v. Kent, 230 N. Y. 239, 243; Crouch v. Gutmann, 134 N. Y. 45, 51.) A failure of consideration in the adjudicated invalidity of a patent relieves [84]*84the licensee of the obligation to pay royalties, even without notice of repudiation of the license (Marston v. Swett, 82 N. Y. 526). Obviously, this issue cannot be determined summarily.

It is competent to contract with respect to patents which may or may not be invalid, if that be the intention of the parties. However, this must clearly appear and in the case at bar is rebutted by the express representation of the licensor that it owns or has the right to grant licenses ” (Herzog v. Heyman, supra, p. 591). Since a triable issue is raised, the motion for summary judgment must be denied.

Moreover, the doubtful legality of the license agreement sued on, discussed in connection with the first defense, precludes the granting of summary judgment.

The first defense alleges that the contract is against public policy and consequently void and unenforcible. A number of postulates in support of this contention are set forth, including the claim that the licensor refused to grant the license unless all patents of the licensor were thereby embraced. It is only necessary to find one of them sound to uphold the sufficiency of this defense.

Illegality renders an agreement unenforcible (Matter of Abbey [Meyersen], 274 App. Div. 389). An agreement which is against public policy is illegal. Since the public policy here required to be ascertained relates to patents, the Federal rule in respect of public policy governs (MacGregor v. Westinghouse Co., 329 U. S. 402, 407; O’Connor v. Hudson River Day Line, 269 App. Div. 960, affd. 296 N. Y. 501; Adler v. Zimmerman, 233 N. Y. 431, 438). We find the public policy in the Constitution, the statutes and judicial decisions (Glaser v. Glaser, 276 N. Y. 296, 302; Vidal v. Girard’s Executors, 2 How. [U. S.] 127).

A patent is a privilege limited to the invention defined and is granted in furtherance of the public policy to promote the progress of science and useful arts (Mercoid Corp. v. Mid-Continent Co., 320 U. S. 661). This policy does not require extension of the monopoly incident to a patent beyond the invention therein defined. If the patent is utilized to compel the purchase of unpatented items, the patent will not be enforced (Mercoid Corp. v. Mid-Continent Co., supra, p. 666), and the same result follows if the patent is utilized for the purpose of compelling the purchase of unpatented materials to be used with the patented item (Motion Picture Patents Co. v. Universal Film Mfg. Co., 243 U. S. 502, 512; Ethyl Gasoline Corp. v. United States, 309 U. S. 436). When the agreement involving the patent attempts to fix prices, it is to be scrutinized for the purpose of ascertaining the [85]*85validity of the patent in order to vindicate the paramount public interest against restraint of trade (Katzinger Co. v. Chicago Metallic Mfg. Co.,

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194 Misc. 81, 84 N.Y.S.2d 597, 79 U.S.P.Q. (BNA) 446, 1948 N.Y. Misc. LEXIS 3636, Counsel Stack Legal Research, https://law.counselstack.com/opinion/hazeltine-research-inc-v-de-wald-radio-mfg-corp-nysupct-1948.