WASHBURN & MOEN MANUF"a CO.
v. CINCIr(NAT'I
BARBED WIRE F. CO.
675
"finished,"-that to the furniture trade the word "finished" means something, und that it means something other and .different than it might mean to a. man who was not engaged in that trade. '!tis for you, ,upon the testimony I to determine what that word did meaD I in trade and commerce in this country, on March 3, 1883. Having found out what the trade meiming was, you will then apply that. meaning to these articles. If you reach the conclusion that they were "'not finished," within the trade meanirig of that term,thim your verdict must be for the plaintiffs. Should you reach the conclusion that they were "finished," within the trade meaning of that' word, your verdict will be the defendant. The jury tendered a verdict for the defendant.
WASHBURN
&
MOEN MANUF'O
FENCE
Co. ";' CINCINNM'I' BARBED Co.
WIRE
(Circuit CQurt, 8. D. Ohio,
w: D.
June 20, 1890.)
P.TBNTB INVENTIONS-AsSIGNMENT AND LIOENSE-SUIT FOB ROYALTIES-PLEADING. A patentee who grants a license to manufacture and sell tjJ.e patented article, under a contract bY' which the licensee is to make monthly reports, and pay...a stipulated royalty, and for failure to comply with which the licensor may declare a forfeiture, cannot sue in equity to compel the licensee to make reports and account for royalties due, or, on his failure to do so, to enjoin 'I\.im from further manufacture or sale,. By sucll prayer, he waives the f!lrfeiture clause, and is left t!l his aotion at law for the royalties.
In Equity. On demurrer. Lehroo/nn & Parks, for complainant. James Moore, for defendant.
<
SAGE, J. The bill sets forth that the complainant is the owner of certain patents relating to barbed wire, and machinery for making the same; that the defendant is its licensee, engaged in making and selling barbed wire under the license,which provides that the defendant shall make monthly reports of its manufacture and sales, and pay the stipulated royalty thereon; and that, for failure to comply with the provhlions of the license, the complainant may declare a forfeiture. The bill further sets forth that many licenses have been granted by the complainant upon like terms with that of the defendant, all for the manufacture and sale of a limited quantity per annum of specified styles of wire; that for the proper maintenance of its business, and of the rights of the seveml licensees, monthly reports are necessary; that defendant promised, by its acceptance of the licehse, to co-operate with complainant in tainingthe license system; thl1t it has failed to keep its agreement, and is engaged in making and selling barbed wire under the license without making monthly reports, or paying royalty. The prayer is that the fendant· be decreed to perform its agreement; that an account be had of
676
FEDERAL REPORTER,
vol. 42.
the royalties due on its manufacture and sales; and that, unless it compH'll!'!. with the requirements of its license, it be enjoined from further :sales thereunder. A general demurrer is interposed by the defendant; the point relied upon ,being that the complainant has an adequate remedy at . . The defendantrelies upQn Waahbttrn &- Moen Manufg Co. v. Freeman Wire,CQ., 41 Fed. Rep. 410; Root v. Railway Co., 105 U, S. 189; Pu.rifier Co.v. WoY",28 Fed. Rep, 814; and Crandall v. Co.; 24 738. ,Waahbttrn &- Moen Manuf'g Co. v. Freem(J((l. Wire 00., was, in particular,,§uch a case as this, and tJ,fe:ilemurrer to the bill was sustained. In Purifier 00. v. Wolf, the license authorized the defendants to make and sell the patented article, and reserved the royalty, to be paid at the end of each month, upon the return of the number and kind of machines manufactured and sold. The court held that the payment of the royalty was a condition subsequent, and not precedent, and hence that the license was absolute, and, unless it contained some provision of forfeitme for non-payment, the failure to pay the royalty did not forfeit it, and that the licensor was left to his action for the royalty, and could not sustain a bill upon the patent as for an infringement. The court Ray, Justice BRADLEY 'pl'onouncing the opinion, thatA suIt for royalty on a license is a suit at Common law, or, if in equity. it is a equity. not depending at all upon the patent, law. and not wit.hinJhe, j,urisdictionofthe circuit court of the United States, unless the partie8:are citizens of different states." The· court further said that, in view of the decision in v. Railroad 00.,105 U. S.189,·they were satisfied "that the cause of action on the license is not within the equitable jurisdiction of the court; and therefore, if there had been a prayer in this bill for relief on the license for a recovery of the royalty, I don't, think ,it could have been maintained." Counsel for the complainant undertakes to :<.listinguish that case from this, but we are unable to see that it does not fully apply. In Crq,nda.ll V:"lI1arwja.cturing Co., it that the licensor had an adequate remedy at law, and could not maintain a bill in equity for an aecountin,g qf royalties aCCI:uing under th,e license. In that case it appears from tb,e report that the oJ;1ly question was how much was due from the licensee under his contract, and no iljljunction was prayed for. The demurrer to the hill was sustained, given to the complainant to amend,. In Densmore y. Tanite 00.,32 Fed. Rep. 544, which was also cited by counsel for the defendant, the bill was brought to annul the license for the non-payment of the royalty. The cOllrt held that there could be ,no doubt that such a cause fell within the cognizance of equity, but that tqe fail\1re to make returns ,of manufiwture and sales, and pay the royalty, afforded no ground for annulling the license; and the desustained, and the bill dismissed. Counsel for the complaiT'lUl,t call!! attention to the fact that the report Qf that case does not s(3t out the provisiolls of license, and suggests that it may be safely to report and to pay royalty was not a cause of .forfeiture. the assumption, it avails the complainant nothing;; II
WASHBURN & MOEN
CO. v. CINCINNATI
677
for in no material respect does a cause upon a license containing no such clause of forfeiture differ from the present case, in which the forfeiture clause is waived, and therefore, so far as the distinction claimed is concerned, might as well have been omitted. It is contended by counsel for the complainant that the license in the present case gives the licensee nothing more than a qualified right to manufacture and sell the patented article, and that that right is dependent upon the payment of the royalties, and subject to forfeiture for non-payment. But this contention disregards the pregnant suggestion of Justice BRADLEY in Pur1fier Co. v. Wolf, already referred to, that, inasmuch as the payment of the royalty is a condition subsequent, and not a condition precedent, the license is absolute, subject only to the forfeiture clause. Such being the contract, the proposition in this case to waive the forfeiture, and substitute an injunction against manufacturing or selling under the license until paynientof arrears of royalties, is, in effect, an appeal to a court of equity to coerce payment by making and enforcing a new contract for the parties, which ought not to be done. ReJeld v. Woodfolk, 22 How. 318. In Woodworth v. Weed, 1 Blatchf. 165, cited for the complainant, the claim of forfeiture was not waived. It was held that the license was forfeited, and the licensee liable as an infringer, or to an action for the royalties, at the option of the licensor. In Wilson v. Sherman, Id;, 536, it was held that there was a forbidden use of the ented thing; and as to that use, but not as to the use authorized by the license, a preliminary injunction was granted. In Magic Ruffle Co. v. Elm Oity Co., 13 BIatchf. 151, the license was to manufacture exclusively a specified ruffle, known as the "double ruffle," and to use the patented machines in its manufacture only. The bill alleged that after the license was made the defendants continued to make and sell the double ruffle specified, and also, in violation of their agreement, quantities of single ruffles. It was held that the complainants could sue either for an infringement of the patent, or for a breach of the agreement, and that, as a bill founded on the agreement, although no royalties were payable, and the patent had expired, the bill was not open to the objection that there was a complete and adequate remedy at law, because an account and a discovery were prayed for. and were necessary. In that case the manufacture and sale were clearly not within the license, which distinguishes it from the present case. In Manvfacturing Co. v. Owsley, 27 Fed. Rep. 100, the claim was that the deftmdants had manufactured machines covered by complainant's patent, but not included in defendants'license, which sufficiently distinguishes that case from the present. In McKay v. Smith, 29 Fed. Rep. 295, it does not appear that the license contained a clause of forfeiture. See Perkins v. Hendryx, 23 Fed. Rep. 418. In OilrCup (,'0. v. Manning, 32 -Fed. Rep. 625, there was a covenant not to sue, which the court held was equivalent to a license, and said that it was apparent from the affidavits presented upon the motion for a preliminary injunction that the real controversy was whether the covemmt not to sue was still in force. Upon the facts it was ordered that the motion for an injunction be granted, unless the defendants should ex-
REl?PRTER,
,ect\te anlt0dertaking to secure the complainant for tbe amount of any be in its favor. InlvIa,nujacturing Co. v. Porter, MF,ed.l{ep. 745, the. defendants had repudiated the license, aod combined with other licensees .aAd embarrass the com.. litiga;tion,.and to destroy its license system. It that there was any of forfeiture in the license; and tpe90VitQ.istil1guished the.. cf.\se, upon the facts, from &ot v.Railroad Pu,rifiir.Co. v. Wolf. That case, therefore, does not affect the concITlsi<;m in the present case. There was no clause of forfeiture, so far as the I'aport of the case shows, in Ball Glove Fastening Cb. v. Ball &' Socket Co., 36 Fed. Rep. 309. Washburn &' M. Manuj'g Co. v. Ha'Wkiye Steel Bar Fence CoO. is unreported case. anQ. therefore, tqougll. tbe ruling was made by a judge who is very high authority, not entitled to .the consideration we give.to Purifier 00. v. Wolf,-decided by a judge ofequally high authority, aQd reported,-or to Hartell v. Tilghman, 99 U.S; 547. But.if we disr.egard the distinGtions, above stated, between the cases cited for complainant and this case, it is enough to say that Root v. Railroad Co. overruled those of earlier date, and is a controlling authority against thoseoflater date, which support'the contentions of complainant's counsel. Eureka 00. v.. Bailey Co., 11 Wall. 488, is relied upon as exactly in point, .and concl1:Isjve against the demurrer. But in that case the Bailey Company was tqeowner ofa reissued patent for an improved washing and wringmachine, and was engaged in the manufacture ofclothes-wringing machines other patents. There was an agreement licensing the Eureka in consideration of a stipulated royalty, to use.the patent of the Bailey Company, and a covenant that the Eureka Company would not directly or indirectly infringe th.e l;'eissued patent of the Bailey Company. The bill sets out the covenants olthe agreement, charging that they were the re.sult Qrp1;otracted negotiatiop, in which the original patent, the reissues, .B.nd the character of the invention were well considered, and that they were a. fair adjustment of the interests of the parties. The supreme court, in Root v. Railroad 00., referring to this case, say that it was because the defendant was guilty of an infringement of the complainant's patent that he wlls suable in equity in the United States courts, and that it was because of the infringement. that the injunction was asked, although, as the court say, the object of the suit, doubtless, was to collect the royalty, but that it was sought by means of, and therefore as an incident to, tbejtjrisdiction of the court, invoked for the purpose of enjoining the continuance of what, until the royalty was acknowledged Bnd paid, waS found to be an infringement. The court further say that, for the mere purpose of enforcing the contract for royalty, it was not a case arising under the patent laws, so as to give jurisdiction to the courts of the United..States. This'view is in full accord with the holding in IIarteU v. Tilghman, cited abav!'l,tp.at a suit between citizens of the same sta,te cannot he sustained in the circuit court, as arising under the patof the :United States, ",here the defendant admits the validity ent and the use of the complainant's letters patent, aull a contract is shown
NATIONAL CABLE RV. CO. fJ. SIOUX CITV CABLE RV. co.
679'
governing the rights of the parties in the use of the invention. The opinion of the court, pronounced by Justice Mn,LER, is, that relief in such a suit is founded on the contract, and not on the patent laws. The cases from Blatchford, above cited, appear in the memorandum of cases cited by counsel for the complainant in the court below. To the same point, see Albright v. Teas, 106 U. S. 613, 1 Sup. Ct. Rep. 550, and Manufacturing 00. v. Hyatt, 125 U. S. 46, 8 Sup. Ct. Rep. 756. See, also, Puriftlr/' 00. v. Wolf, 28 Fed. Rep. 814; Seibert Cylindlr/' Oil-Cup Co. v. DetroiJ, Lubricator Co., 34 Fed. Rep. 216; Seiblr/'t Oylindlr/' Oil-Cup 00. v. Manning, Id. 538; Seibert Oylindlr/' Oil-Oup Co. v. William Powell Co., 38 Fed. Rep. 600; and Densmore v. Manufacturing Co., Id. 747. It is to be observed, moreover, that there was no clause of forfeiture in the license contract in Eureka 00. v; Bailey Co. It maya:lso be observed thnt it does not appear that the objection that the complainant had an adequate remedy at law was made in the court below, and, the subject-matter being within· the jurisdiction of equity, it was too late to make it on the hearing in the appellate court. Rey71e8 v. Dumont, 130 U. S. 395,9 Sup. Ct. Rep. 486, and cases cited. Such an objection "should be taken at the earliest opportunity, and before the dE'fendants enter upon a full defense." Kilbourn v. Sundlr/'land, 130 U. S. 514, 9 Sup. Ct. Rep. 594. The objections to recognizing that tho compillinant has the right to an accounting in equity, and to a discovery, are so well stated by Judge THAYER in Waahburn &- Moen Manuf'g Co. v. Freeman Wire Co., 41 Fed. Rep. 410, that it is enough to refer to the decision in that case, which was made, as has already beenstated, upon a casein all respects like the present case. The demurrer will be sustained, and the bill dismissed, at the complainant's costs. The circuit judge concurs in this opinion.
NATIONAL CABLE
Rv. Co. ".
SIOUX CITY CABLE
Rv. Co. et al.
(Oircuit Oourt, N. D. Iowa, W. D. June 2, 1890.) L PJ.TENTS FOR INVENTIONS-NOVELTy-CABLE
Claim 1 of letters patent 179,016, to A. S. Hallidie, for a device used in operating cable railways, was for the combination of a diagonal tube, interposed betwp.en the main tubes containing the cable. with a longitudinal slot therein connecting with the slot on the cable-bearing tUbes, so that when a cable-car passed from one track to another the grip device could pass through it from the tube on one track to that on the other. Held, that the claim was not novel, since before the patent was issued cars were passed from one track to another by means of a track diagonally between them. and all that was necessary in the case of cable-cars was to construct under such track, and diagonally between the two cable-bearing tUbes, a similar tube to conduct the grip. The third claim in the patent was for a pivoted switch rail and spring,Bo·arranged as to obviate the obJection of the opening .made at the meeting of the slot in the branch tube with that in the main tubes. The rail was pivoted on one elld, and worked freely at the other, 80 that the grip, in passing fr.om the branch tube, would press it asid4il,the spring pressing it back into ,place, thus leaVing the slot ill-the Dlain tube unobstructed. Held, that the .combination was novel and patentaQle1 thougll there was uSed before a switch rail on rallroad tracks pivoted at one eun'
TUBES.
9.
SJ.KE-PIVOTBD SWITCH RAIL J.ND SPRING.