
    Jacob Blumer et al., Pl’ffs, v. The National Starch Manufacturing Company, Impleaded, etc., Def't.
    
      (Supreme Court, New York Special Term,
    
    
      Filed June, 1894.)
    
    Contract—Construction.
    The contract, in this case, was so construed that the period of the beginning of the sixty days’ option did not come until experiment showed the successful manufacture of yeast from the by-product in the manufacture of starch of the same quantity and quality as that theretofore used by the defendant.
    Action upon contract.
    
      Hoadly, Lauterbach & Johnson (George Hoadly, of counsel), for pl’ffs; Kerr & Curtis (Elihu Root and Edwin B. Smith, of counsel), for def'ts.
   Russell, J.

—The determination of the title to patents for the manufacture of yeast is to be reached by the decision in this action. Both parties want the patents, the plaintiffs struggling to regain the title and the Starch Company to retain it.

The plaintiffs are skilled chemists and are the inventors of the valuable processes patented; the Starch Company is one of the largest manufacturers of starch in this country.

After certain preliminary negotiations, by agreement dated the 17th day of June, 1892, the plaintiffs agreed with the Starch Company:

First. That the Starch Company would examine as to the validity of the patents.

Second. If the opinion of counsel as to their validity was favorable, the Starch Company would pay the patentees' $2,500, and furnish a suitable building and equipments according to plans, etc., furnished by the plaintiffs, “to determine the availability of the said processes for the utilizing in the manufacture of yeast the waste product of its processes of manufacturing starch, and the commercial availability of the said inventions and processes for the purposes of its business.”

Third. The patentees agreed to furnish the plans and specifications, and “will devote their time and attention to erecting and operating the same, under the direction of the officers of the Starch Company, without compensation, and that they will use their best efforts to put such experimental plant into successful operation as soon as practicable."

Fourth. ITpon the payment of '$2,5Q0, and the furnishing the facilities for the experimental plant, the Starch Company should have the option of an exclusive license under the patents of certain territory, “upon the terms and. conditions specified below, until the expiration of the period of sixty days from the time when the said experimental plant is in successful operation and producing yeast, by the operations described in said patents, in sufficient quantity tq enable the Starch Company to. put the same upon the market and test its commercial availability.”

Fifth. The, option was to be exercised by the Starch Company within the said period of sixty days by notice in writing and the further payment of $22,500; otherwise the agreement terminated at the, end of said sixty days.

The Starch Company was further tp pay the patentees a royalty of one cent a pound, and also, out of the net profits, a further sum of $500,000.

The further provisions of the contract relate more particularly to the details of the business upon the basis of a successful experiment and realization.

The struggle in this action arises upon the claim of the plaintiffs that the option was not exercised within sixty days, as provided for by the contract, which claim is resisted by the, effort of the Starch Company to show full compliance, either actual or tendered, and strict conformity with the contract; and the main question, therefore, to be solved is the actual date when the somewhat indefinite period from which the time begun to run really occurred.

When was the “said experimental plant in successful operation?”

The Starch Company’s plant in Indianapolis was the scene selected by the parties for the experiment. The Starch Company, under the direction of the patentees, erected an addition to their starch plant for the purpose of the experiment. This starch plant had a capacity for converting daily 2,400 bushels of corn ultimately into starch. It used water for the purpose, and, prior to the introduction of the invention of the plaintiffs to the use of- the Starch Company, the steep yrater from the starch manufactory passed away as waste product. The invention of the plaintiffs was characterized by them in a communication as early as March, 1892, delivered to the Starch Company, as “Blumer and Schlagenhaufer’s method of utilizing waste products. Our invention has for its purpose to open a new and profitable field to the starch industry by utilizing certain liquid waste products which heretofore were of little value.”

The minds of the parties were, therefore, directed, not to the manufacture of yeast from unused corn, but to the successful manufacture of yeast from the waste product of corn, after the corn itself had done its service in the manufacture of starch.

The experimental plant was ready for occupation by the middle of August, 1892, and received the liquids from the starch manufactory by pipes connected with vats in the new plant, erected for that purpose under the supervision of the plaintiffs. With some delays, not material to the consideration of this action, the experiment was put into operation, and it was discovered prior to the 19th of November, 1892, that yeast of a superior quality could be manufactured, but not without injury to the starch manufactured. Experiments were continued, and especially with the use of sulphurous acid, which would obviate the necessity of crushing the corn, until January, 1893, during the early part of which month it was finally ascertained how the process of the plaintiffs could be applied to the waste products and successfully manufacture yeast of fine quality without injury to the manufacture of starch. Prior to that time it had been found impossible or impracticable to manufacture the quantity or quality of starch which was the principal product of the manufacturing enterprise, and at the same time manufacture successfully the yeast from the waste products. During the latter part of January the plaintiffs claimed that the sixty days had expired, while the Starch Company claimed that this périod had not elapsed, and tendered a compliance on their part with the remaining provisions of the contract to entitle them to the license for the use of the patent in the United States and Canada.

I cannot agree with the theory of the plaintiffs that the meaning of the agreement between the parties is that as soon as the successful manufacture of yeast became apparent the sixty days began to run, and that this period of sixty days was the time within which the question of the successful operation, in connection with the successful manufacture of starch, was to be more completely tested. I do not think the time of option began to run upon the instant that the yeast itself, as yeast, was a commercial success. The parties themselves agreed upon the terms of the contract with reference to the utilization of the processes for the life of the patents. It was a large undertaking and entirely, so far as the evidence shows, an experiment. There never was much doubt but that yeast might be successfully made of corn, and the minds of all of the parties were directed, from the beginning to the end, to the question as to whether the two enterprises could successfully go on together and produce an enhanced value to the manufacture of corn starch by the utilization of a by-product which had theretofore gone to waste. The parties thus contemplated the stages of expectancy, experiment and fruition. The days of fruition were those within which by repeated experiment the purchasers might determine that the success of the experiment was not intermittent, but constant.

There are many details connected with the case, in the large mass of oral and documentary evidence submitted, which are not necessary to consider here. I prefer to decide this case upon the broad ground stated, and hold, as matter of law, from the subject upon which the contract operated, with the knowledge of the parties, and the conduct of the parties themselves, as well as the terms of the contract, the period of the beginning of the sixty days’ option term did not come until experiment showed the successful manufacture of yeast from the by-product in the manufacture of starch of the same quantity and quality as that theretofore used by the Starch Company in its Indianapolis plant.

Judgment, therefore, goes for the defendant, the Starch Company, dismissing the complaint. .

Judgment for defendant.  