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AMERICAN SIGN AND INDICATOR CORP. v. SCHULENBURG

July 29, 1958

AMERICAN SIGN AND INDICATOR CORPORATION, PLAINTIFF,
v.
EDWARD J. SCHULENBURG, EDWARD J. SCHULENBURG, JR., HELEN E. SCHULENBURG, AND MARIE V. POTTEBAUM, DOING BUSINESS AS TIME-O-MATIC COMPANY, AND TIME-O-MATIC, INC., DEFENDANTS. TIME-O-MATIC, INC., PLAINTIFF, V. AMERICAN SIGN AND INDICATOR CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Platt, Chief Judge.

Time-O-Matic, Inc. hereinafter referred to as TOM filed suit in the Northern District of Illinois to declare patent No. 2,673,976, owned by defendant, American Sign & Indicator Corporation, hereinafter referred to as ASI, invalid, not infringed, to obtain an injunction restraining unfair competition by ASI, and to recover damages. This action was transferred to the Eastern District of Illinois and consolidated for trial with a suit by ASI against Edward J. Schulenburg, Edward J. Schulenburg, Jr., Helen E. Schulenburg, and Marie V. Pottebaum, operating as a partnership under the name of Time-O-Matic Company, hereinafter referred to as TOM Co., and Time-O-Matic, Inc., an Illinois Corporation, organized July 11, 1956. ASI seeks damages for breach of oral contract and/or breach of a confidential relationship, injunctive relief and damages for infringement. On December 19, 1952 the application for patent was filed by Charles and Luke Williams as inventors, and the patent issued March 9, 1954. Prior thereto the Williams Brothers Neon Products had operated as a partnership in Spokane, Washington, in the business of painting, selling and installing neon signs which they bought from others. In 1949 Charles and Luke Williams organized Williams Brothers, Inc., which continued in existence even after the subsequent organization of ASI in 1952. ASI was incorporated for the purpose of selling, throughout the United States, a sign displaying time and temperature on a single bank of lights, and to this corporation the Williams brothers assigned all their rights under the patent.

The following issues are presented:

(1) Was there an oral contract between Williams Bros. Inc. and TOM Co. whereby the latter was to manufacture and sell exclusively to Williams Bros., Inc. equipment for displaying time and temperature on a single panel of lights, and whereby Williams Bros., Inc. was to purchase all equipment for these signs from TOM Co.?

(2) Was there a confidential relationship between TOM Co. and ASI or Williams Bros., Inc.?

(3) Is the patent valid?

(a) Are TOM Co. and TOM estopped to deny the validity?

(4) If the patent is valid was it infringed?

(5) If ASI has failed to establish the oral contract or the confidential relationship, and the patent is invalid, is TOM entitled on the basis of unfair competition, to damages and to restrain ASI from interferring with the sale of its equipment for displaying time and temperature on a single bank of lamps?

In March, 1951, Williams Bros., Inc. attempted to interest the Spokane and Eastern Branch of the Seattle First National Bank in a sign with the tape or vertical tube type thermometer, with a clock at the bottom. This idea was abandoned. About July 1, 1951, Williams Bros., Inc. contacted the bank to sell a sign displaying time and temperature on the same panel. Williams Bros., Inc. applied for copyright on this design on July 3, 1951 and it was registered in the United States Copyright Office July 31, 1951.

TOM Co. had been in the business of selling control equipment for several years. They had furnished this equipment for various types of signs displaying separately time and temperature. The Williams brothers knew of TOM Co.'s equipment, and on May 23, 1951, Charles Williams telephoned J.W. Sutphin, Sales Manager for TOM Co. in Danville, Illinois. He testified that he told Sutphin he had a prospect for a sign; that he wanted to have the time and temperature alternatingly displayed on a single bank of lights; that he wanted to know if TOM Co. could build this equipment and at what price. He further testified he mentioned to Sutphin that TOM Co.'s equipment could be adapted for this purpose in several ways including double filament lamps, relays, brush bar, or the like for lifting the contacts. Sutphin testified that Charles Williams made no suggestions for accomplishing the result; that he said TOM Co. could supply the equipment but they would have to figure out the price and the means of accomplishing the end. W.E. Bachman, Specifications Engineer at TOM Co., heard what Sutphin said and corroborates him. After this conversation Sutphin and Bachman discussed the proposition and also conferred with Mr. Banks, in the engineering department at TOM Co. Sutphin suggested using a flasher having cam operated contacts to accomplish the alternating display.

Bachman wrote Charles Williams, May 25, 1951, and enclosed a sketch of a composite lamp bank and quoted the suggested list price for one numeral clock mechanism at $880, one numeral temperature control at $1,980, and one relay panel for switching the lamp bank from the clock mechanism to the thermometer control at $600. He also enclosed photographs of the equipment. Sutphin testified that these were standard prices for the mechanisms, and that the charges for the relay unit used for switching purposes represented the estimated cost; that no charge for engineering was included. Later Ed. Schulenburg returned to the factory and suggested the use of a lifter bar instead of the relay panel. Subsequently the Williams brothers on several occasions met with the bank officials to sell this sign, which was characterized as the "Double T". To induce the sale by assurance that the sign was new, the Williams brothers, without revealing the name of the bank requested and received a letter from Sutphin dated August 31, 1951, stating that the idea of a "Double T" was new and that TOM Co. had "never furnished equipment for a combination time and temperature indication."

In September, 1951, the Williams brothers approached Greek Wells, their attorney, and requested that he take steps to file application for a patent. They obtained a letter from him stating that they had consulted him concerning a patent on a "Double T" sign.

Williams Bros., Inc. had submitted a written proposal to the Spokane and Eastern Bank, dated July 10, 1951, in which it said:

    "To our knowledge and Time-O-Matic Company of
  Danville, Ohio, (sic) who build the control
  mechanisms, this will be the only unit displaying the
  correct time and temperature alternately from the
  same reader panel."

Armed with the letter from Sutphin dated August 31, 1951, and the letter from Greek Wells dated September 13, 1951, the Williams brothers had a conference with the Bank at Seattle to sell it the sign, with exclusive rights in that part of the State.

TOM Co. had a distributor of their products for the Pacific Northwest known as Northwestern Agencies, Inc. in Seattle, Washington, and a jobber for their products known as Coastal Sales Company at Spokane, Washington. Both sold electrical equipment for other manufacturers.

A meeting was held September 21, 1951, in the Camlin Hotel in Seattle. Present were Charles Williams, Luke B. Williams, E.J. Schulenburg, and Norman Emden, an employee of Northwestern Agencies, Inc. Schulenburg was in the Northwest part of the country and had been notified to contact Williams Brothers, Inc. Charles Williams testified that at this meeting he told Schulenburg about the bank prospect; that it looked like they might have something big; that they were applying for a patent and had given the Bank an exclusive on the sign; that they would buy from TOM Co. all the equipment if TOM Co. would not sell to anybody else; and that Schulenburg consented. Luke corroborates Charles except that he stated Mr. Schulenburg said that any inquiries on the sign would be referred to them. Schulenburg testified that he did not recall any mention of the patent or exclusive arrangement with the Bank, nor any statement that TOM Co. was to sell exclusively to Williams Bros., Inc., and that he explained how the lamps could be placed on the sign, the location of the control thermometer, and the operation of the equipment which TOM Co. could furnish.

Williams Bros., Inc. received a letter dated December 11, 1951 from Sutphin stating that any inquiries received on the equipment for alternating time and temperature would be referred to it. In 1952 inquiries started to ...


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