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OTTO v. ORANGE SCREEN CO.

August 5, 1944

OTTO
v.
ORANGE SCREEN CO.



The opinion of the court was delivered by: FORMAN

Arthur L. Otto, plaintiff, and his assignor, A.L. Otto Company, entered into an agreement with Orange Screen Company, the defendant, on April 29, 1926, whereby the latter agreed to pay royalties on metallic screens which it manufactured and sold under a patent and certain inventions owned by plaintiff and his assignor for the life of the patent which expired in August of 1943. Royalty payments under this agreement were twenty cents per screen for the first ten thousand screens made and sold in any one calendar year, twenty-five cents per screen on all screens in excess of ten thousand and less than twenty thousand screens and fifteen cents per screen for all screens in excess of twenty thousand screens. It was also provided that a minimum of $2,000 per year, payable quarterly, should be set upon the amount of annual royalty to be paid.

Among other provisions in the contract there appeared the following: "Thirteenth: If at any time during the continuance of this agreement said company shall desire to terminate the same, it may do so upon written notice to said licensors, whereupon all payments hereunder shall cease, but the company shall be entitled to no refund of monies accrued or paid to said licensors prior to said termination. If such termination occurs by the act of the Company under this paragraph all right and title to any Letters Patent and inventions which said Company may have acquired shall automatically revert to said licensors without further act by either of the parties."

 For a number of years after the execution of the contract the relationship of the parties was characterized by frequent requests of the Otto Company or its president addressed to the Orange Screen Company, to bring to a current basis the payment of the royalties due, or reports of manufacturer contemplated under the contract, and by almost as frequent requests by the Orange Screen Company to the licensors to alter the method of payment of royalties to be made by it.

 Eventually, in 1936, a further agreement was entered into between the parties as set forth in the following letter:

 "A.L. Otto Co.

 "Philadelphia, Penna.

 "January 25, 1936.

 "Orange Screen Co.,

 "Maplewood, N.J.

 "Dear Mr. Balch:

 "This letter is to be read in connection with my letters of November 27th, 1935 and January 13th, 1936.

 "The thoughts expressed in those letters are important and it is essential that you comply with the various requirements.

 "First: The balance due to Mr. Kalish by you is to be paid.

 "Second: All unpaid royalties for the year 1935 are to be paid at this time.

 "Third: No further bills are to be created by or through Mr. Myers (your attorney, or other attorneys, which will in any way obligate the A.L. Otto Co. or myself, without my approval and consent.)

 "Fourth: You are to pay to the A.L. Otto Co. on the first day of each calendar month for the period of twelve months beginning February 1st, 1936, the sum of Two Hundred Dollars ($200.00) or a total sum of Twenty-Four Hundred Dollars ($2,400.00) for the year.

 "Fifth: Upon your failure to meet punctually the terms and conditions of this agreement in respect to payments, the entire amount remaining unpaid under this agreement shall become due and payable. The specific purpose of this paragraph is to insure exact compliance with the terms in reference to payments.

 "Sixth: It is understood and agreed that in making this proposal, none of the terms and conditions laid down in our existing contracts relating to your manufacture and sale of Aluminum Screens under A.L. Otto patents are waived but they are to remain in full force, excepting that neither A.L. Otto Co. nor myself are to be further obligated for any legal services during the year 1936, excepting by written consent on our part.

 "Seven: You are to make monthly reports showing the number of screens manufactured by you (Aluminum Screens) for each calendar month during 1936.

 "Eight: If you comply with the terms of this agreement we will send you a receipt in full for all royalties which may become due to us for the year beginning January 1, 1936 and ending December 30, 1936, said receipt to be given after you have made payment in full as required by this agreement.

 "The foregoing agreement is submitted in response to repeated requests from you for some form of temporary financial relief under the contracts herein referred to and and is submitted without prejudice and is specifically limited to the calendar year 1936.

 "Very truly,

 "A.L. Otto Co.

 "A.L. Otto, Pres."

 The parties agreed to an arrangement for the year 1937 in substantially the same terms set forth in the 1936 agreement except that the payments were for the sum of $220 per month or $2,640 for the year. The following letter evidences the agreement:

 "A.L. Otto Co.

 "Philadelphia, Pa.

 "February 9, 1937.

 "Orange Screen Company,

 "Maplewood, N.J.

 "My dear Mr. Balch:

 "In reference to your letter of January 13, 1937, our reply thereto under date of January 25, 1937, your further letter of January 29, 1937 and our reply thereto under data of January 30, 1937, followed by your letter of February 1, 1937, we acknowledge receipt of your check in the amount of $220.00 which we have not yet deposited, preferring to await your formal reply to this letter.

 "Tying all these letters into this correspondence as a matter of record, we submit the following in response to the request contained in your letter of January 13, 1936 for a different method of paying royalties than that stipulated in our existing contracts relating to your manufacture and sale of aluminum screens under A.L. Otto patents and for the year 1937 only.

 "Our proposal is as follows:

 "1: No further bills are to be created by or through your attorney, Mr. Myers or any other attorneys or individuals or corporations which will in any way obligate the A.L. Otto Company or A.L. Otto without out joint approval and consent.

 "2: You will pay to the A.L. Otto Company on the first day of each calendar month for a period of twelve consecutive months beginning February 1, 1937, the sum of $220.00 or a total sum of $2640.00.

 "3: Upon your failure to meet punctually the terms and conditions of this agreement in respect to payments, the entire amounts remaining unpaid under this agreement shall become due and payable. The specific purpose of this paragraph is to insure exact compliance with the terms in reference to payments.

 "4: It is understood and agreed that in making this proposal, none of the terms and conditions laid down in our existing contracts relating to your manufacture and sale of Aluminum Screens under A.L. Otto Patents are waived but they are to remain in full force, excepting that neither A.L. Otto Co. nor A.L. Otto are to be further obligated for any legal services during the year 1937, excepting by written consent on our part.

 "5: You are to make monthly reports showing the number of screens manufactured by you (Aluminum Screens) for each calendar month During 1937.

 "6: If you comply with the terms of this agreement we will send you a receipt in full for all royalties which may become due to us for the year beginning January 1, 1937 and ending December 30, 1937, said receipt to be given after you have made payment in full as required by this agreement.

 "The foregoing agreement is submitted in response to your request for relief under the contracts herein referred to and is submitted without prejudice and is ...


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