Royal Industries, a Corporation v. St. Regis Paper Company, a Corporation

420 F.2d 449, 164 U.S.P.Q. (BNA) 236, 1969 U.S. App. LEXIS 9606, 1970 Trade Cas. (CCH) 73,019
CourtCourt of Appeals for the Ninth Circuit
DecidedDecember 22, 1969
Docket22456, 22717
StatusPublished
Cited by14 cases

This text of 420 F.2d 449 (Royal Industries, a Corporation v. St. Regis Paper Company, a Corporation) is published on Counsel Stack Legal Research, covering Court of Appeals for the Ninth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Royal Industries, a Corporation v. St. Regis Paper Company, a Corporation, 420 F.2d 449, 164 U.S.P.Q. (BNA) 236, 1969 U.S. App. LEXIS 9606, 1970 Trade Cas. (CCH) 73,019 (9th Cir. 1969).

Opinions

HUFSTEDLER, Circuit Judge:

Royal Industries (“Royal”) brought this action against St. Regis Paper Company (“St. Regis”) for patent infringement and unfair competition. Federal jurisdiction was based on 28 U.S.C. § 1338. Royal appeals from the orders of the District Court denying Royal’s motion for a preliminary injunction (28 U. S.C. § 1292(a) (1)) and granting St. Regis’ motion for summary judgment (28 U.S.C. § 1291).

St. Regis was licensed to practice the patent in suit and to use the manufacturing know-how to produce the patented product, plastic tie strips. Royal cannot successfully maintain its patent infringement-unfair competition action unless St. Regis’ license was effectively terminated.

Royal contends that it terminated St. Regis’ license for breach of an oral condition to the written license that required St. Regis to adhere to sale prices set by Royal. St. Regis replies that: (1) the California parol evidence rule forecloses proof that there was any oral price fixing agreement; (2) even if the oral, condition could be proved, Royal, as one of two licensors, could not unilaterally terminate the license and Royal’s eolicensor joined in neither the notice of termination nor this action; and (3) if there were any such oral condition, it is unenforceable because it violates the antitrust laws.

The following facts are uncontrovert-ed : Royal obtained the patent in suit by assignment from the inventor-patentee, Gerald C. Bower, in April, 1963. Shortly after it acquired the patent, it purchased 80 percent of the stock of PlasTies Corporation (“Plas-Ties”). Bower retained the other 20 percent of the stock. Plas-Ties was manufacturing and selling the patented article, and at all times material hereto, it has continued to do so. At the time Royal acquired the patent, negotiations were underway between Bower and Plas-Ties on one side and Pollock Paper Company Division of St. Regis on the other looking toward the licensing of St. Regis to practice the patent and to use manufacturing know-how developed by Plas-Ties to produce the product. After Royal acquired the patent and its interest in Plas-Ties, Royal entered the negotiations. The negotiations proceeded by way of correspondence and conferences among Royal’s president, Johnson, Plas-Ties’ president, Bower, and their patent counsel, and St. Regis’ representatives, Jacobs and Lacy, and their patent lawyer. On May 2, 1963, at a meeting in Pasadena, the written license agreement was signed by Johnson for Royal, by Bower for Plas-Ties, and by Lacy for St. Regis. Lacy was vice president of the Pollock Paper Division. The signature of the president of St. Regis was not added un[451]*451til the license agreement was sent to St. Regis’ corporate offices in New York.

The licensing contract contains the usual provisions of a patent and know-how license. Then it pegs the amount of royalties payable to a percentage of the net dollar sales by St. Regis. It also contains this price reduction formula: “If Royal reduces its selling prices below those set forth in the attached Exhibit A, said 10% royalty shall be reduced one percentage point for each 5% reduction in the selling prices, provided however that the royalty shall not be reduced below 5%.” Exhibit “A” is a list of PlasTies’ sales prices. The written license contains several termination clauses, none of which bears any conspicuous relationship to a failure to maintain prices fixed by the licensors.

St. Regis’ prices for plastic tie strips were the same as those charged by Plas-Ties until February 1966, at which time St. Regis reduced its prices. PlasTies followed suit the next month. In June 1966, St. Regis made another price reduction. Royal complained, and a conference between Royal and St. Regis followed. Thereafter St. Regis raised its prices, but not to the same price level as Plas-Ties. In May 1967, St. Regis again reduced prices. Royal’s response was a letter dated June 8, 1967, claiming breach of contract and stating that the license would be terminated in 10 days unless St. Regis met Royal’s price in the interim. St. Regis did not raise its prices. It refused to recognize termination and has continued to manufacture and sell the product.

In 1965, Royal acquired the remainder of Plas-Ties stock, and Plas-Ties since then has been wholly owned by Royal.

The existence of the claimed oral agreement is in dispute. Royal’s version, according to Johnson’s testimony, is this: Johnson had insisted throughout the negotiations that the contract must contain a provision permitting Royal to fix the prices at which St. Re-gis could sell the patented product. Without protection on pricing, he told St. Regis’ negotiators, “I might just as well put a gun to my head.” St. Regis representatives “objected strenuously on [sic] including anything in the agreement regarding price fixing because they said that we would probably have to go to jail as it was illegal, and that they would not put anything like that into the agreement.” Johnson said that he did not think the agreement was illegal. St. Regis representatives remained adamant, and Johnson then said “Well, if that is the case we simply can’t reach an agreement.” At this juncture, the St. Regis people said to Johnson, “not once but many times,” that “ ‘While we can’t put that in the agreement, you have our positive assurance at all times that we will respect your prices. There may come a time when we may want you to drop prices, and in such event we will come to you and ask you, but if you don’t think you can, and it is not the right thing to do, then we will stay with your price.’ ” After he received assurance that “we have a complete, positive, thorough understanding expressed by all three of them that they will at all times respect Royal’s pricing,” he agreed to sign the agreement omitting the condition.

Even according to Royal’s version of the negotiations, however, it is by no means clear whether the reference to “your prices” was to Royal, to Plas-Ties, or to both.1 The confusion is compounded by Royal’s insistence that Plas-Ties and Royal were somehow one legal entity.

The first ground upon which the District Court decided that summary judgment should issue was that the Califor[452]*452nia parol evidence rule foreclosed consideration of Royal’s evidence concerning the alleged oral condition. If the District Court was right, the conflicts in the evidence relating to the claimed oral condition are immaterial. If Royal cannot prove the oral condition, its case collapses, and St. Regis is entitled to judgment forthwith.

The parties agree that California law controls this issue. That law, as enunciated in Masterson v. Sine (1968) 68 Cal.2d 222, 65 Cal.Rptr. 545, 436 P.2d 561, does not exclude Royal’s evidence. Neither counsel nor the District Court knew about the Masterson case, because the decision was not handed down until the day before the District Court filed the judgment.

Long before Masterson was decided, the principle was settled that the parol evidence rule affected only “integrated” writings, and that an integrated writing is a document which the parties intended as the complete and final embodiment of the terms of their agreement. (Pollyanna Homes, Inc. v.

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420 F.2d 449, 164 U.S.P.Q. (BNA) 236, 1969 U.S. App. LEXIS 9606, 1970 Trade Cas. (CCH) 73,019, Counsel Stack Legal Research, https://law.counselstack.com/opinion/royal-industries-a-corporation-v-st-regis-paper-company-a-corporation-ca9-1969.