Eastwood, Goldmann and Francis. The opinion of the court was delivered by Eastwood, S.j.a.d.
The basic question involved in this matter is the interpretation or construction of the patent license agreement between the parties.
The case was tried before the Superior Court, Law Division, and a jury. A verdict for the stipulated amount ($12,500) of the royalties allegedly due under the agreement was returned in favor of the plaintiff. The defendant appeals from the trial court's denial of its motion for summary judgment and from the ensuing judgment.
On August 10, 1943 United States Patent No. 2,326,303 was issued to Frank N. Moerk and George M. Eisenberg for an invention relating to the treatment of organic substances such as sewage, industrial wastes, and the like. Thereafter Dr. Eisenberg worked with Joseph Metzendorf, an employee of the defendant company, on an adaptation of the invention for the production of penicillin. Their joint efforts brought about the construction of a deep fermentation tank in which culture media was supplied to the fungus known as penicillin chrysogenum , resulting in the production of the well-known antibiotic penicillin. A patent application was about to be made therefor by Messrs. Eisenberg and Metzendorf, when the license agreement of November 24, 1944 was made. Later, a patent was issued and conformably to the agreement was assigned to the defendant company. On August 7, 1950 A. M. Stackhouse, as trustee for the beneficiaries of Patent No. 2,326,303, assigned and transferred to the plaintiff said patent and the invention
covered thereby and said license agreement. Later, Mr. LeDuc instituted this action for the recovery of alleged due and unpaid royalties.
The agreement in question was executed by H. H. Garis, president for the defendant company, and A. M. Stackhouse, as trustee for the beneficiaries of the patented invention, granting to the defendant a non-exclusive license to use the patented invention "for the submerged or deep-tank fermentation process as applied to organic substances other than sewage or industrial waste"; in the agreement, A. M. Stackhouse renounced for himself and associates all interest in the invention of Dr. Eisenberg and Joseph L. Metzendorf covering specifically penicillin; it was provided therein that the licensor would grant similar agreements to companies designated by the defendant for the use of the invention "for submerged or deep-tank fermentation process" as applied to organic substances other than sewage or industrial waste; and for the payment of royalties and the basis for computation thereof, for all products "made by the submerged or deep-tank fermentation of organic substances covered by the aforesaid patent." (Italics ours). The italicized phrase was inserted in the agreement by Mr. Garis, president of the defendant company.
The distinctive feature of both the plaintiff's patented process and apparatus is a circulatory system by which the flora and the nutrient medium are maintained in continuous and intimate contact, thereby inducing fermentation of the sludge. The apparatus designed for this purpose was a vertical cylindrical tank with a conical bottom, from which by means of an external pump the contents of the tank were drawn out, and recirculated, mixed with air, to the upper portion of the tank through a pipe that led tangentially into the tank and thus set up a spiraling or vortical movement of the mass until it was again withdrawn at the bottom.
In the defendant's operations for producing penicillin it employs a portion, but less than the whole, of the invention patented. In the place of an open tank that would ordinarily
be employed in processing sewage or industrial waste, the defendant employs a closed or sealed tank as is required for the production of penicillin to prevent contamination. It is also asserted that a modified type of agitator was employed as an adaptation for penicillin production.
At the conclusion of the trial, defendant moved for judgment in its favor on the ground that the agreement imposed royalty obligations only for operations "covered by" the patent and that the evidence indicated that the process and apparatus employed by defendant was not that patented by plaintiff and, therefore, there was no issue of fact for determination. The trial court denied defendant's motion and charged the jury that it was not requisite that defendant embrace all the elements of claim patented by plaintiff to become liable for the payment of royalties, but that it was sufficient if its operations or apparatus employed a portion of any patented claim.
In its argument for a reversal of the judgment the defendant contends that the patent claims, as registered in the United States Patent Office, determine what is "covered by the patent"; that all operations or apparatus except those within the monopoly of the patent, as defined in the claims, are excused from royalty payments; that plaintiff's patent claim embodies approximately five claims; that defendant's operations and apparatus employed less than the whole of plaintiff's patent claims and, therefore, it is not subject to royalty payments under the license agreement. Further, it argues that each element of the claim is material and necessary to the patent and that any combination of process or apparatus which does not include every such element is not the patented invention and is not "covered by the patent."
The defendant contends further that it was error for the trial court to deny its motion for judgment at the end of the case; that its obligation to pay royalties depended upon use of the apparatus or operations covered by the patent as explained in the patent claims; that the ...