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Rosenthal v. De Nemours

November 20, 1944

ROSENTHAL
v.
E.I. DU PONT DE NEMOURS & CO.



Appeal from the District Court of the United States for the Southern District of New York.

Author: Hand

Before L. HAND, AUGUSTUS N. HAND, and CHASE, Circuit Judges.

AUGUSTUS N. HAND, Circuit Judge.

This is an appeal by the plaintiff from a judgment granting defendant's motion to dismiss the complaint. The action was to recover a judgment: (1) That defendant be held liable for 2% of the net selling price of every pound of artificial yarn, other than cellulose acetate yarn, manufactured and sold by the defendant under a patent license granted by the plaintiff to the defendant in an agreement between the parties dated May 1, 1938; (2) that if, by reason of a mutual mistake of fact, the agreement is not binding upon either party, defendant be required to pay the reasonable value to it of the patents, ideas and methods disclosed therein which have been used and are being used by the defendant.

The plaintiff Rosenthal, in Article 1 of the agreement, granted to the defendant Du Pont, "a non-exclusive, non-assignable license to practice the inventions and to make, use and/or sell the products described and claimed in said Rosenthal Letters Patent Nos. 1,617,544 and 1,620,233, and reissues and extensions thereof, throughout the United States of America, its territories and dependencies, together with the right in du Pont to license du Pont's customers to make, use and/or sell, in any country, fabrics comprising yarn bought from du Pont and licensed to du Pont herein, to the extent that such fabrics are covered by said Rosenthal United States Letters Patent * * * reissues and extension thereof."

Article 2 of the agreement provided that:

"Except for cellulose acetate yarn, du Pont agrees to pay to Rosenthal a royalty of two per cent (2%) of the net selling price of every pound of artificial yarn manufactured and sold by du Pont within the United States of America, its territories and dependencies, and/or manufactured by du Pont within the United States of America, its territories and dependencies and sold without the confines thereof, under the licenses granted in Article 1, provided that no royalty shall be paid or required on waste or on yarn other than first grade yarn."

Article 3 of the agreement provided that du Pont pay to Rosenthal a royalty of 1% of the net selling price of every pound of cellulose acetate yarn manufactured and sold by it under the license.

Article 5 of the agreement set forth how the amount of money to be paid Rosenthal for past infringements was to be determined, and Article 7 provided that du Pont should pay half of the amount so determined at the time of the execution of the agreement but need not pay the second half or any royalties "until either or both of said Rosenthal Letters Patent shall, by a final decree of a United States court of competent jurisdiction, from which no appeal is taken, be held valid and infringed by the manufacture, use or sale of uneven denier artificial yarn of whatever character."

It was further provided in Article 7 as follows:

"It is agreed, however, that if in any suit said Rosenthal Letters Patent Nos. 1,617,544 and 1,620,233 are held invalid or not infringed by the manufacture, use or sale of uneven denier artificial yarn of whatever character, by a final decree by a court of competent jurisdiction from which no appeal is taken, then du Pont's obligation to pay said remaining one half of said amount payable for past infringement, as provided for in the first paragraph of Article 5, and to pay any royalty for the license granted herein, shall forever ceade, * * *

"Rosenthal shall pay back to du Pont any royalties which du Pont shall have paid up to that time, together with the amount paid for past infringement except that portion paid at the time of execution of this Agreement."

Du Pont paid to Rosenthal $6,999.99 in performance of its agreement in Article 7 that it would pay one-half of the amount determined under the provisions of Article 5.

Under the agreement between the parties the question whether du Pont was to pay the second half of the amount fixed as damages for past infringements and was to pay the royalties for exercising the license under the patents was to be decided in a suit by Rosenthal against the Celanese Corporation. A suit by him against Celanese was pending prior to the execution of the agreement but it was discontinued because it had been started before Celanese had committed the acts that were supposed to infringe the patents and a new suit was then immediately begun which was intended to determine whether du Pont must continue payments under the agreement. This suit was brought in the District of Delaware and Judge Nields, who conducted the trial, decided that the patents were invalid and ...


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