American Machine & Metals, Inc. v. De Bothezat Impeller Co.,

166 F.2d 535 (2nd Cir. 1948)

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Nature of the Case

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Facts

In 1934, P and D agreed to a contract for D to convey patent rights and equipment for making fans to P and P agreed to pay D a license fee of not less than $5,000 annually based on the net sales of the products. So long as the contract continued, the fees were to be paid on net sales regardless of whether P's products were covered by the patents or even if they had expired. The contract would be terminated on six months notice by either party. In the event of termination, the patents were to be transferred back to D and P would no longer use the name 'De Bothezat.' By 1946, P did not need the patents any longer. P then wanted to terminate the contract and still manufacture fans and ventilating equipment. D lead P to believe that upon termination, D would sue P if he does not cease the manufacture and sale of fans and ventilating equipment. P then sued for a declaration of rights under the contract. The district judge found that no controversy existed as P had not yet given notice of termination and dismissed the complaint. P appealed.