WOODBURY, Circuit Judge.
This is an appeal from a final judgment in a suit for patent infringement wherein the court below dismissed the plaintiff's complaint and also its counterclaim for an accounting and royalties, and awarded the
The patents in suit are No. 2,082,730 issued to the plaintiff as assignee of C. W. Brenn on June 1, 1937, and No. 2,258,573 issued to the plaintiff as assignee of A. A. Johnson on October 7, 1941. The court below held such of the claims of both patents as were put in issue in this litigation invalid "for lack of invention." D.C., 102 F.Supp. 981, 983. Moreover all of the claims of both patents were held invalid for the same, and also for other reasons, in a suit brought by the plaintiff against another defendant in the Seventh Circuit. Autographic Register Co. v. Uarco, Inc., D.C.N.D.Ill.1949, 86 F.Supp. 730, affirmed, 7th Cir.1950, 182 F.2d 353, certiorari denied 340 U.S. 853, 71 S.Ct. 82, 95 L.Ed. 625, rehearing denied, 1951, 342 U.S. 856, 72 S.Ct. 71. We see no occasion to canvass the matter of patentable invention again. It will suffice for us to say that in spite of everything said by the appellant in its briefs and oral argument, reading the three opinions cited above leaves us with the firm conviction that the claims of the patents here in suit cover but shadows of shades of ideas "which would naturally and spontaneously occur to any skilled mechanic or operator in the ordinary progress of manufactures", to paraphrase and quote the now classic language of Mr. Justice Bradley in Atlantic Works v. Brady, 1882, 107 U.S. 192, 200, 2 S.Ct. 225, 231, 27 L.Ed. 438, and hence will not support the grant of a monopoly under the patent laws. Indeed the district court opinions cited above, and Judge Lindley's thorough opinion written for the Court of Appeals for the Seventh Circuit in the Uarco case, all so fully cover the facts, and so clearly demonstrate invalidity for lack of patentable invention, that further elaboration on our part could add nothing of any consequence to what has already been said. Therefore, except to record our amazement that 12 and 45 claims respectively should be used to cover obviously very simple alleged inventions, indeed inventions said by the plaintiff to have outstanding merit for that reason, we leave the matter of validity where it stands and turn to the questions raised by the respective counterclaims, taking up first the one filed by the defendant.
It appears from the findings of the court below, as to which there is no real dispute, that on July 21, 1942, the plaintiff granted the defendant a non-exclusive non-transferable license to manufacture, use and sell the devices covered by the Brenn and Johnson patents in suit, and three other patents. The defendant as licensee agreed, inter alia, that during the term of the license it would not "directly or indirectly attack or question the validity" of any of the patents included in the license, and, absent the licensee's insolvency, the license was to continue in force until October 7, 1958. There was no provision for earlier termination of the license by either party. Apparently the license was lived up to by both parties without question until the patents in suit were held invalid by the United States District Court for the Northern District of Illinois in 1949 in the Uarco case cited above. The defendant was not a party or a privy in that litigation, but when it learned of the judgment therein its counsel communicated with the plaintiff for the purpose of repudiating the license agreement of 1942. Defendant's counsel talked with Mr. C. W. Brenn, the plaintiff's vice president and general manager, over the telephone and said that in view of the Uarco decision the defendant did not consider itself liable for any future royalty payments. Mr. Brenn expressed confidence that the District Court's judgment in the Uarco case would be reversed on appeal, and defendant's counsel then suggested that royalty payments accruing in the future should be paid to some third party "in part or in full in escrow" subject to refund if the District Court's judgment in the above case should be affirmed. Mr. Brenn did not accept or reject this proposal out of hand but said he would have the plaintiff's patent attorney, Mr. A. A. Johnson, who is not a member of the bar, communicate in reply. Mr. Johnson did so by telephone later that day and defendant's counsel repeated
Following this conversation, in October 1949, the defendant sent the plaintiff a check bearing the legend "this payment is made under protest and without prejudice," and with the check it sent a letter reading: "In conformity with the telephone conversation had between our attorney, Mr. Maurice V. Seligson of New York, and your attorney, Mr. A. A. Johnson, enclosed herewith please find royalty check which is paid under protest and without prejudice." The check and the letter were brought to the attention of Mr. Brenn, and by him discussed with Mr. Johnson. The court below found that Mr. Brenn "was aware of the defendant's last proposal and understood that the check was submitted as an offer pursuant thereto." The plaintiff accepted and retained the proceeds of the check without communicating with the defendant. In January and again in May, 1950, the defendant, "believing that its offer had been accepted," to quote again from the findings of the court below, sent the plaintiff checks bearing the same legend, with similar covering letters, and the plaintiff again appropriated the proceeds of the checks without communicating with the defendant. The checks sent as above totaled $6,999.49 which is the amount with interest thereon which the defendant seeks to recover under its counterclaim.
On May 25, 1950, (rehearing denied June 29, 1950) the Court of Appeals for the Seventh Circuit handed down its decision affirming the District Court's judgment in the Uarco case, and the defendant on the day rehearing was denied made demand on the plaintiff for repayment of the amount of the three checks. The plaintiff refused, and then the parties entered into a written agreement terminating their 1942 license as of June 28, 1950, without prejudice to the "obligations of the parties under the said license agreement which existed prior to the cancellation thereof."
On the facts outlined above the court below held that the parties in 1949, by their properly constituted agents, had orally modified their license agreement of 1942 whereby the defendant acquired the right to recover the amount of the royalties it had paid to the plaintiff "under protest and without prejudice." That court said:
The defendant rests its counterclaim upon the theory adopted by the court below, that is, upon the theory of an oral modification of a pre-existing licensing contract whereby royalties paid thereunder from and after the date of the District Court's judgment in the Uarco case would be refunded by the plaintiff in the event that that judgment should be affirmed by the Court of Appeals for the Seventh Circuit. Thus the counterclaim is a permissive
We need not consider the jurisdictional problem lurking in cases like the present in greater detail, however, for here we have a clear independent ground under Title 28 U.S.C. § 1332(a) (1) for federal jurisdiction over the counterclaim for the sum in controversy is nearly $7,000 and the corporate plaintiff owes its existence to the laws of New Jersey and the corporate defendant to the laws of Massachusetts. State law is therefore applicable under the rule of Erie Railroad Co. v. Tompkins, 1938, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 and we must turn to the law of the forum, Massachusetts, to determine what state's law to apply. Klaxon Co. v. Stentor Electric Manufacturing Co., Inc., 1941, 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477.
Massachusetts, in conformity with the usual rule (see Am.Law Inst., Restatement, Conflict of Laws § 332) refers to the law of the place of contracting to determine the validity and effect of a promise in the respects with which we are here concerned, Adamowski v. Curtiss-Wright Flying Service, Inc., 1938, 300 Mass. 281, 15 N.E.2d 467 and the place of contracting was New Jersey where the plaintiff has its principal office, for that is where the plaintiff by its silent appropriation of the defendant's checks accepted the defendant's offer, if its act amounted to acceptance, and the contract amending the 1942 license agreement came into being if any such contract ever came into being at all. Am.Law Inst., Restatement, Conflict of Laws § 327.
Two questions of New Jersey law arise. The first is whether the plaintiff's acceptance of the defendant's checks and its appropriation of the proceeds thereof without communicating with the defendant constitute an acceptance of defendant's offer to modify the pre-existing license agreement of 1942. And second, if it did, was there any valid consideration flowing from the defendant to the plaintiff to support the undertaking of the latter to refund the royalies paid "under protest and without prejudice" in the event that the District Court's judgment in the Uarco case should be affirmed on appeal?
There is no finding by the court below, perhaps on the evidence there could be none, that the plaintiff acting through its president and general manager by silent acceptance and appropriation of the defendant's checks intended as a matter of fact to accept the defendant's offer for modification of the license agreement. On the other hand, there is no finding of a contrary intention. However, a finding of positive intention to accept an offer is not always necessary to the creation of a contract. It is elementary that an offer may be accepted by performing or refraining from performing a specified act as well as by an affirmative answer,
Thus we come to the question whether the plaintiff's implied undertaking to refund the royalties under consideration in the event of an affirmance by the Court of Appeals in the Uarco case was supported by adequate consideration. The plaintiff contends that it was not. The argument is that the defendant in paying those royalties was only performing a clear obligation imposed upon it by the licensing contract, and hence the payment will not support the plaintiff's conditional promise to refund for the reason that performance of a previously existing contractual obligation is not a sufficient consideration. 1 Williston, Contracts, (Rev.Ed.) § 130; see also 1 Am. Law Inst., Restatement, Contracts § 76(a). We do not agree for the reason that the defendant's contractual duty to pay royalties after the District Court's decision in the Uarco case was not clear but on the contrary open to honest and reasonable dispute.
In Automatic Radio Mfg. Co., Inc. v. Hazeltine Research, Inc., 1 Cir.1949, 176 F.2d 799, affirmed 339 U.S. 827, 70 S.Ct. 894, 94 L.Ed. 1312, rehearing denied, 1950, 340 U.S. 846, 71 S.Ct. 13, 95 L.Ed. 620, this court had occasion to consider at some length the question of a non-exclusive licensee's duty to pay royalties after the patent, or some of the patents covered by the license, had been held invalid in litigation between the patentee-licensor and third parties. There is no occasion here to go over the ground again. It will be enough to say that the discussion in the above case and the texts therein cited (1 Williston, Contracts, (Rev.Ed.) § 137 and 2 Walker, Patents (Deller's Ed.) § 384) clearly indicate that the law on the matter is, in general, unsettled, and that we have been able to find no clear and unequivocal holding in New Jersey that on no theory whatever may a non-exclusive licensee be excused from further payment of royalties by a holding in other litigation that the licensed patent is invalid.
In view of our conclusion that the court below was correct in holding that the oral agreement of 1949 modifying the licensing contract of 1942 was valid and binding, with the result that the defendant is entitled to recover on its counterclaim, there is no occasion to consider the plaintiff's counterclaim which is for an accounting and payment of royalties from the date of the District Court's judgment in the Uarco case to June 28, 1950, when the licensing contract of 1942 was terminated by mutual agreement in writing.
The judgment of the District Court is affirmed.