UNITED STATES OF AMERICA
v.
WESTERN ELECTRIC COMPANY, INCORPORATED, AND AMERICAN TELEPHONE & TELEGRAPH COMPANY, COMPONENTS, INC., APPELLANT

3d Cir. | 1969-05-07
No. 17591
Before HASTIE, Chief Judge, and GANEY and VAN DUSEN, Circuit Judges.
409 F.2d 1377 United States Court of Appeals for the Third Circuit (1969)

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Holding

The court held that the district court correctly dismissed the application for determination of reasonable royalties because it sought to resolve past royalties, not future ones as contemplated by the consent judgment.


Facts & Procedural History

Components, Inc. sought a patent license from Western Electric under a consent judgment. They negotiated an agreement, but disputes arose over royalty…

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Opinion of the Court
VAN DUSEN, Circuit Judge.

. United States of America v. Western Electric Co., Inc. and American Telephone and Telegraph Co., Civil Action 17-49 (Dist. N. J.).

. Components claims that it was unaware of this fact when it entered into the 1960 agreement. For reasons which shall presently appear, this factor is irrelevant to our decision. See pages 4-5 below.

. Components’ application alleges that this reduction was “unilateral” and its counsel argued to us that it constituted a “repudiation” of the agreement. This factor will be seen to he irrelevant to our decision; see footnote 2, supra.

. Western Electric Co., Inc. v. Components, Inc., Civil Action 2820, Delaware Ct. of Chancery, Components has filed no answer in this action, a stay having been granted in December 1968 pending the outcome of the appeal now before us.

. This order also disposed of certain motions relating to discovery. Components had served subpoenas and a notice of taking of depositions upon Western, which had moved to quash the subpoenas and to set aside the notice. Components had then moved to stay the hearing on its original application until completion of discovery. These motions were declared moot by the order of dismissal.

. The application fails to allege that the “written request” required by Section X (B) of the consent judgment was received by Western, and counsel for Components conceded at oral argument before us that no formal written request for a license had been served. We express no opinion as to whether Components’ application to the District Court would suffice under X (B) as such a request, as contended by counsel.

In an opinion dated 2/26/68, the District Court denied an application of a dis tributor of private communication systems to intervene in this action on the ground that the Government had refused to enforce the consent decree of January 24, 1956. See United States v. Western Electric Company, Incorporated, et al.— Application of Clark Walter & Sons, Inc., (D.N.J., C.A. 17-49), aff’d. sub nom. Clark Walter & Sons, Inc. v. United States, 392 U.S. 659, 88 S.Ct. 2286, 20 L. Ed.2d 1348 (1968).

. Since the enforceability of the 1960 licensing agreement is irrelevant to our decision, discussion of Components’ alleged right to discovery on the point is unnecessary.

. Paragraph (8) of its application alleges that:

“Components, Inc. has never accepted the reduced royalty rates as unilaterally proposed by Western Electric in the aforementioned letters of December 4, 1963 and October 4, 1965 * * *. Per contra, Components, Inc. deeming the proposed royalties to be unreasonable, has been engaged in negotiations virtually continually since the issuance of patent 3,093,883 on June 18, 1963 in an attempt to reach agreement by compromise and settlement as to a reasonable royalty in the premises.”

. Thus the District Judge stated:

“The final judgment did not contemplate review of license agreements that were entered upon and retroactive considerations of reasonableness of royalties demanded in those agreements. It may be in the future — although it is not necessary for the Court to pass upon that now — if there were no contract between Components and Western Electric and Components made application for a license agreement, and if on consideration of that application and the terms of the agreement reasonable royalties could not be agreed upon, it may be that under such a state of facts that Components could seek the aid of this Court, but it would be only for the purpose of royalties to be paid in the future, not for a review of past performance.”

It is noted that Components’ application failed to allege that the parties were “unable to agree” with respect to future royalties, and, as noted in footnote 6, supra, also failed to allege a “written request.”

. Even assuming that Section X(B) contemplates a determination of past royalties, it would appear unwise, for reasons of sound judicial administration and “a proper regard for the autonomy of the states,” to preempt that previously filed state action in which Components is assured of a hearing as to the matters raised in its application to the District Court. See Mottolese v. Kaufman, 176 F. 2d 301, 302 (2nd Cir. 1949); cf. United States v. Libbey-Owens-Ford Glass Co., 1955 CCH Trade Cases, ¶ 68,207 (N.D.Ohio 1955).


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