Cases—Interpretation—Contracts must be interpreted sensibly to give effect to all provisions

The ordinary rule in Illinois is that a license agreement without a fixed term is terminable at will, but that rule can be overcome by other language in the agreement, according to the U.S. Court of Appeals for the Seventh Circuit in an opinion by Judge Frank Easterbrook.

The once-mighty Wurlitzer Company was split up in 1985—its piano and organ operations became part of Baldwin Piano, while its jukeboxes went to Deutsche Wurlitzer, GmbH. Baldwin owned the trademark, while DW had a license to use the trademark on jukeboxes. In 2003, Baldwin announced that the license was canceled, and immediately filed suit under the Lanham Act to keep DW from using the name. The contract contained the following clause:

Except as herein provided, and as provided in Article 14 hereof, this Agreement shall continue in force without limit of period but may be can celled by the Licensor for material breach. In the event of Licensee’s material breach of this Agreement, Licensor shall notify Licensee of the breach and Licensee shall have ninety (90) days to cure the breach or to request arbitration by a single arbitrator in accordance with the then current rules of the American Arbitration Association.

Contracts, wrote Judge Easterbrook should be interpreted in a “sensible” way so that important clauses do not “drop out.” If the license were terminable at will, then this clause serves no purpose whatsoever. The court concluded that the license was “perpetual” but was terminable for cause. Baldwin Piano, Inc. v. Deutsche Wurlitzer GmbH, 2004 U.S. App. LEXIS 26127 (7th Cir. Dec. 16, 2004).