Lear, Inc. v. Adkins

Lear, Inc. (defendant) hired John Adkins (plaintiff) to develop an improved airplane gyroscope. The agreement provided that Adkins would to grant Lear a license to any inventions or developments in return for agreed-upon royalties. Adkins developed an improved gyroscope that Lear incorporated into its products. In 1954, Adkins filed a patent application for the gyroscope and began licensing negotiations with Lear. In 1955, Lear and Adkins entered a licensing agreement whereby Lear agreed to pay Adkins royalties for the right to manufacture the Adkins gyroscope. The licensing agreement further provided that if no patent was granted, or if the issued patent was later held invalid, Lear would have the right to terminate the agreement and cease payments. The Patent Office rejected Adkins’s initial application, as well as two subsequent amendments. Lear believed that Adkins would not successfully obtain the patent and ceased paying royalty payments. The Patent Office eventually granted Adkins’ patent in 1960. Adkins sued Lear to enforce the licensing agreement. The jury returned a verdict in Adkins’s favor, and the trial judge granted Lear’s motion for judgment notwithstanding the verdict. On appeal, the appeals court concluded that Lear had the right to terminate payments under the licensing agreement. The Supreme Court of California reversed, and the United States Supreme Court granted certiorari.