Taylor Engines, Inc. et al. v. All Steel Engines, Inc. et al, 192 F.2d 171 (9th Cir. 1951)

I. Ownership of the Patents.

Our first concern is with a definition of the interests of the respective parties to the patents in suit. The appellants contend, and the trial Court found, that the license to the Nevada corporation was executed on September 18, 1940. Hence, it is argued by appellants, that the Nevada corporation took nothing under it because Taylor and Selig had previously divested themselves of all interest in the patents by the prior grant to the California corporation, and had taken no reassignment thereof, and, since the Nevada corporation had received no title by the purported transfer, the California corporation was in a position to and did at a later date effectively reconvey to Taylor and Selig, and this conveyance of the California corporation to Taylor and Selig is relied on by appellants as a link in the chain of their claimed title. The trial Court resolved the question as to whom the title belonged by applying the doctrine of after-acquired title, holding that the assignment by Taylor and Selig of an exclusive license to the Nevada corporation was in all respects an assignment of the patent rights, carrying with it an implied warranty of title, and that the later acquisition by Taylor and Selig, its grantors, of title to the patents from the California corporation, inured to the benefit of their prior grantee, the Nevada corporation. Thus, when Taylor later attempted to convey to the appellants he had nothing to convey. D.C.N.D. Cal. 1950, 88 F. Supp. 745, 747. We agree with the result reached by the trial Court but prefer to base our decision on the broad equitable principle that where one purports, for value, to convey title to personal property which he does not own, as between the grantor subsequently acquiring title and the grantee, the latter should have the property. Where, as here, the grantor subsequently acquires such title to personalty equity will enforce the grantee's interest to prevent unjust enrichment of the grantor. Thus, in the present case when the California corporation reconveyed to Taylor and Selig they held the property in the patents subject to the equitable claim in the Nevada corporation.¹  The equitable claim of the Nevada corporation could have been cut off by a sale to a bona fide purchaser, but the appellants have failed to place themselves in that class. The trial Court found, on substantial evidence, that at the time the individual appellants took the conveyance from Taylor they took with notice of the prior exclusive license to the Nevada corporation. Taylor Engines was formed by appellants for the purpose of acquiring title to the patents and exploiting them; they were its officers and acted on its behalf, as well as individually, in the transaction whereby the corporation acquired its interest in the patents. These circumstances impute the knowledge of the individuals to the appellant corporation. 3 Fletcher, Cyclopedia of Corporations. Secs. 799, 803, 809, 827(1947). This same notice precludes appellants from relying on the statutory requirements of recordation of patent assignments. 35 U.S.C.A. § 47.

Appellants argue that, in any event, they have absolute ownership of one of the patents in issue for the reason that said patent is not an improvement of the basic patent granted in the exclusive license to the Nevada corporation. The trial Court, on substantial evidence, found the patent in question was an improvement and, hence, its finding must be sustained. Pointer v. Six Wheel Corporation, 9 Cir., 1949, 177 F.2d 153.

II. Infringement.

Appellees charged infringement in that appellants licensed Crosley Motors, Inc., a corporation, to manufacture the engine described in the patents, and the trial Court so found. Appellants contend that this finding had no support in the evidence. While appellants' position on this question is not clearly spelled out, their contention seems to be bottomed upon the theory that the mere granting of a license to the use of the patent rights without subsequent action under such license, such as a manufacture, use or sale of a physical embodiment of an infringing device, does not constitute infringement, and that there is no evidence of either manufacture, use or sale by Crosley Motors, Inc. We do not agree. We find substantial evidence in the record of manufacture by the Crosley corporation, which sustains the finding of the trial Court.

III. Laches and Acquiescence.

Other errors relied on by appellants relate to findings of the trial Court that appellees had not slept on their rights to the extent they are guilty of laches or acquiescence. We think the trial Court's findings in the particulars complained of were correct. During the period of time in question appellees were busy defending their title in the suit brought against them by Taylor in the state court; and the appellants at all relevant times had notice of the existence of the appellees' claim and the suit pending in the state court. Such inaction on the part of the appellees as did occur was necessary and excusable and not of such a nature as to bar relief.

Judgment affirmed.