Lear, Inc. v. Adkins

395 U.S. 653 (1969)

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Nature of the Case

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Facts

In January of 1952, P was hired by D to solve a vexing problem D had encountered in its efforts to develop a gyroscope that would meet the increasingly demanding requirements of the aviation industry. P developed a method of construction which improved gyroscope accuracy at a low cost. D immediately incorporated P's improvements into its production process to its substantial advantage. In 1954, P applied for a patent on his ideas, and in 1955 he entered into a licensing contract by which D agreed to pay royalties for his improvements until such time as the patent application might be refused or the patent was held invalid. In 1957, after D's patent application had been rejected twice, D announced that it would no longer pay royalties on some of its gyroscopes, and D terminated all royalties in 1959. When P made his original application in 1954, it took the average inventor more than three years before he obtained a final administrative decision on the patentability of his ideas, with the Patent Office acting on the average application from two to four times. P finally got the patent in 1960. P sued D for breach of contract and under quasi-contractual obligations. D sought to raise patent invalidity as a defense. The trial judge directed a verdict of $16,351.93 for P on the California gyros, holding that D was estopped by its licensing agreement from questioning the inventor's patent. On the Michigan gyros, the court instructed the jury to award P only if it was satisfied that P's invention was novel, within the meaning of the federal patent laws. The jury returned a verdict for P of $888,122.56 on the Michigan gyros, The trial judge granted Lear's motion for judgment notwithstanding the verdict, finding that P's invention had been completely anticipated by the prior art. Both appealed to the Court of Appeal. The court held that Lear was within its contractual rights in terminating its royalty obligations entirely in 1959 and that if P desired to recover damages after that date he was 'relegated to an action for infringement' in the federal courts. As to pre-1959, The court held that the contract required D to pay royalties on both the California and Michigan gyros regardless of the validity of the patent. Both sides appealed. The California Supreme Court held that the doctrine of estoppel barred D from questioning the propriety of the Patent Office's grant. With respect to the Michigan product, the court found that D had in fact 'utilized the apparatus patented by P throughout the period in question,' and reinstated the jury's $888,000 verdict on this branch of the case. The Supreme Court granted certiorari.