Eastman Oil Well Survey Corp. v. Lane-Wells Co.

California Supreme Court Apr 23, 1943 No. L. A. 18186Published

Before: Traynor

AI Brief

AI-generated · verify before citing

Holding. The court held that the royalty agreement only required the licensee to pay royalties for services rendered using the licensor's patented methods, not for services performed using the licensee's own independently developed methods.

Issues

Whether a royalty contract requiring payment for 'orienting services' applies to services performed using the licensee's own independently developed methods rather than the licensor's patented methods.

Disposition. affirmed

Quotations verified verbatim against the opinion

“The term royalty ordinarily envisages a duty to make and a corresponding right to receive payments proportionate to the use of patented methods or machines.”

“The phrases “services rendered under this license,” and “service rendered hereunder,” are not the equivalent of “all orientation services;” they are limiting phrases that make it unnecessary to account for all services”

[873]

TRAYNOR, J.

— Plaintiff, Eastman Oil Well Survey Corporation, brought this action for a declaration of its obligations under a contract with defendant, Lane-Wells Company. The contract gave plaintiff a license to use patented methods for orienting oil wells, i.e. discovering the angle and the direction in which they have been drilled. In return, plaintiff agreed to pay a royalty representing a percentage of what it charged its clients for orienting wells. After the execution of the contract, plaintiff perfected a new method of orientation, and seeks a declaration that it need pay no royalty on transactions in which it uses its own methods.

Defendant relies on the language of the royalty clause of the contract, providing that, “Licensee Covenants and Agrees to pay to Licensor, . . . the following royalties: For each orienting survey of a well bore, a sum equal to sixteen and two-thirds percent (16%%) of the total charge made by licensee for such orienting service, but in no event shall such royalty be less than the sum of Twenty-five Dollars ($25.00) ...” Similar language appears-in subsequent sentences. A royalty is specified “For orienting any tools,” and likewise “For orienting pipe.” The next clause provides that “It is expressly Understood and Agreed that the royalties herein provided shall be computed from and paid for all orienting services rendered by Licensee from and including January 1, 1938.” This language, taken by itself, might be construed to require plaintiff to pay a royalty on any orienting service, whether or not the patented methods were used. Such broad language, however, is to be read in the light of the subject matter of the contract and the apparent intentions of the parties.

(Lemm,

Stillwater Land & Cattle Co.,

217 Cal. 474 [19 P.2d 785];

Hollander

Wilson Estate Co.,

214 Cal. 582 [7 P.2d 177].) The term royalty ordinarily envisages a duty to make and a corresponding right to receive payments proportionate to the use of patented methods or machines.

Eastman Oil Well Survey Corp. v. Lane-Wells Co.

AI Brief

TRAYNOR, J.

More from California Supreme Court

Related research

AI Brief