774 I£'istsilltledtiy:the ease of Oehtr6 "ij? v. 70 Iud. 562, where tlJ.\l l'igpt ofthe l'ailrond company to the aid voted never existed orna'Ceasedtoexist;that them!()ney belongs to'the township or the ta'ltpnyers; In either case, the petitioners, if the facts alleged· in their petitionBball be fol1nd to be true o:hihetrial, ought tI})prevail. The murrerto the intervening petition presents no question of estoppel by decree. If by counsel 'in argument on that subject is good law, about which I the court expresses' no opinion; still the petition discloses no mcts preaenting any such question. The suffi. ciency of the petitionm.nst be dettlrmined'upon its allegations, and not upon matters deh.ors 'petition;:llFrom these considerations it follows that the demurrer to the intervening :petition ought to be overruled, and it is so ordered.
:CCWoutt:Oo'Urt, D.lniJtdna. August 19, 1892.)
8,706. 1. REHOVAL 0'1' CAUIll!i8-Looi&."L PREJUDIOE'-'-NoTlClil 0'1' MOTION.
Under tile local iul'luen\le "clause of the act of Maroh 8, 1887, § 2, notice to the 'adverse party of a lDotlonfor the removal of a cause is not tional,andsuch motion maybe made upeD.ex parte hearing. though it is the better to give College v. Toledo, etc., Ry. 00., 47 Fed. Rep. 886, appl'Ovoo; , "
.. SAMB- MOTION TO· RBMANB-COUNTEB :AUrDA VIT8.
a;
Where a petition supported for the removal of a cause from a state to a federal court has been legally granted under the "prejudice and local infiuence" clause of Act March 8, 1887,52, cl. 4,'plalntitT will not be allowed to file counter affidavits denying the of localprejudice in \Iuppor,t ofa motion to remand, when it not shown that the court was misled or imposed upon in granting the order of removal. ' Where .one of the defentiants is a, mere stakeholder or .Interested on the side of plaintitT, the fact that Is a citizen of the same state with plaintitT will not de· feat the right of his codefendant, with whom the real controversy exists, to remove the cause,under the provisiolls of ,Act § 2.
S4HE-(jITIZENSHrP-ARRANGEMENT O'l'PARTIBS.
.. PATENTS FORbVllNTIONS":':AsSIGNMENT:-RBsCISSION.
The purchaser of a patent right oannot rescind the sale 'on the ground of false representations that the patent w8l\ ,valid, and did not interfere with any prior patent, where.the contract of sale itself contains an express warranty to the same , 'elf.ect, and.an engage.ment On the partof·the grantor to defend at his own expeuse . all suits for ,
Representations .by the soller of a patent right, that the same is valiC! and does not interfere,with .any:prlor patent, must be regarded· as matters of opinion, and not as statemeuts of tact, lJnless it appearlltllat there was a prior patent covering the identicsl invention, and that the seller was aware thereof· .. .SAME-RltscISSION-S'l'ATU· Quo, ' :'.. ., Where a contract fOr the sale .ofcert.ain patent ri&"hts is sought to be rescinded, plaintiff must first show 'that he hlis .dOne all in hlS power to place defendantin . lItatu quo by returning the .. f., S$E-AsSIGNMENT....STA'fiB RE(lULATIQN-OONSTITUTIONALLi.w. :Rev. St. Ind. 1881, § 600*,- requiring. a p\lrson w:ho sells.qr oifers. for sale patents to 1I1e with the clerk6ttbe!propercoubtS" 8'duly authenticated copy of the letters patent, and an affidavit that the letters are genuine and have not been revoked or annUlled, and that he has a to sell the same, is a legitimate ell;orcise of the police power of the state, and lS not in conflict either with Const. U. S. art. I, § 8,
... SAHE-:-F'ALSB R)l:PRIlSBNTATIoNS-MATTBRS OF OPINION·
·"
,.,
REEVES
fl. CORNING.
775
, granting :toauthors and' inventOrs :the exclusive 'right to their 'reilpectivewrltlngs and discoveries fOf Hmited time,s, or with the,v,rovision of thfl fourteenth amend· ment, which forbids ,the, ,ljtatea to abridge theprjVihlges al1d immunities of citizens of the United States. BrechbU£ v. Ritndrtll, l N.E. Rep.lltl2, followed. CasUe . v. Hutchitmo71, 25 Fed. Rep. 394, ,
6.
CONSTITUTIONAL LAW-VALlDl'ry OF
A court, hall no power to. adjudge a ,statuteunconstituttonal simply because i.t may. seem. to the Court that such legislation does not conform to the general tlleory upon which the g'overnment is founded. " .
OF CoURTS.
.
.'
,
,,
In Equity. Suit by Alfred B. Reeves' against Thomas J.Corning and Joseph 1. Irwin to resciud a contract of sale of certain patents, and to recov,er possession of a note. Heard on demurrer to the complaint. Sustained as to the first paragraph,and overruled as to the second. Cooper & cooper and Stansifer & Baker, for plaintiff. ' Buitler, Snow & Butzer, fOl'defendants. BAKER,DistrictJudge. This action was commenced in the circuit court of Bartholomew county, on the 11th day of May, 1891. The state court ordered process against the defendant Irwin to be iRsued to the sheriff of Bartholomew county, returnable September 29, 1891. Notice by publication was given to the defendant Corning, and was made returnable on the same day. On the 23d day of September, 1891, the defendant Corning, a citizen of the state of Illinois, filed his verified petition for the removal of the cause from the state court into this court, on the ground of prejudice and local influence, making it impossible for him to obtain justice in said court, or in any other state court into which saift eause could be removed. The court, having examined the petition and its exhibits, and being fully advised in the premises, found that the defendant Corning was entitled to have the cause removed from the state court into this court' for the reasons set out in his petition. The court thereupon adjudged that the (',ause be removed from said state court into this court,under and in pursuance of the provisions of an act of congress approved August 13, 1888. The plaintiff has appeared specially, and moved the court to remand. on the ground that the order of removal was made on an ex parte hearing, without notice. It is argned that notice of the petition for removal is jurisdictional, and that the order, being made without notice, is void. and ought so to be held on the motion to remand. It is further insil"ted, if notice is not jurisdictional and the eause was rightfully remO\'ed, the plaintiff ought to have leave to file affidavits controverting the facts on which the court the removal. The plaintiff, therefore, appearing speciaUy has asked to be permitted to reopen the issue of prejudice and local influence, and to be allowed to file counter affidavits. The motion tor leave to file counter affidavits is bottomed on the theory that this court had the authority to order a removal on., an ex parte tion, but that an order of removal so made, like an ex parte order of the court granting a restraining order, is to be in force temporarily, and to be continued in force only in case the court should be satisfied, after a hearing on notice, that its. original order was just and proper. The·act of congress provides thatI
776
iEDEBALBEPORTER, vol.
51.
is brought arid a citizen of another state, any defendant, being such dtlzen of another state, may remove such suit into t.he circuit court of the United States for the proper district at any time before the trial thereof, be made toilppear to said circuit court that, from prejudice or locallnll'nence, he willnot be able to,flqtain justice in such state court, or in any other state court to which the said defendant may, tinder the laws of the IIt"te.,bave .,the, right, on account of. such prejudice or local influence, to resaid cause. " .\.ct March 3, §2. 'The, statute does not, in terms oroy necessary implication, require notice: to the state court or to the adverse party of the application for removal on the ground of prejudice or local influence. Doubtless the better, as well as the safer, practice would ordinarily be for the .court to decline to hear the application until proper notice of the hearing had been given. The question, howev:er, is one of power or rightful authOl'ity,:andnot one relating to the ptopriety of methods of procedQre. The only requirement of the statute is that the party asking for a removal: "shall make it appear to the court that, from prejudice or local influence, he cannot obtain justice in the state court." Questions of prejudiceor.local influence are matters largely resting in opinion, and are notgeneraUy susceptible of proof by evidence of facts, like issues in ordinary actions at law or suits in equity. The cou.rt must be legally, not merely morally, satisfied of the truth of the allegation that, from prejudice or local influence, the defendant. will not be able to obtain justice in the state court. It has been well said thatreqUires some proof suitable to the rlatureof the case.-at iel\St an affidavit of a credible person,:md a statement of facts in such aill(]avit,wbich sufficiently eVince' the 'truth of the allegation. Tile amount and proof required in each case must be left to the. discretion of the Aperfnllctory shgwing by a JorDlal affidavit of nlera relief will not be sufficient. If the petition for removal states the fa,ets iJ,P?n which the a,llegation founded, and that petition 1;>e verified by affi'davitofa person or pth'soirs in whom the cdurt has confidence,this may be regarded as pl'imafacie proof sufficient to slltisfy the conscience of the court. If more should be reo qUired'by the court, more tll14;mld beotl;ered." In re Pennsylvania Go., 137 :U. S. 4;57, Ct.. Rep.143. , ; . Thefatlts and reasoning in this caM are inconsistent with the claim that notice is jurisdictional. Since this case was decided, it has been held, on its authority, that notice was not necessary. In the case of Carpenter v. Railway Co., 47 Fed. Rep. 535, in which no notice of the 'original application had been given, the court, on a motion to remand, 'said that ordinarily one hearing and determination, though ex parte, will ,be' held final, and overruled the motion to remand. In the case of Adelbert Colleg6 v. T07edo,etc., Ry. Co., 47 Fed. Rep. 836, the court held, on 'all' application to remove, 011 account of prejudice and local influence, t.ha.t illf notice was required. It is s.aid: . "There is no requirement in the sta.tutethat .the opposing side shall have notiCe of the application to temove,a.lld be 'allowed an opportunity to be hearel thereon. It would perhaps be the better practice to gi ve the opposite party
«(qtlrt, in which there is a controversy between a citizen of the state in which
.·CWbere a suit is now pending, or may be hereafter brought, In any state
REEVES V. CORNING.
777
notice of the application to remove, before action thereon by the but that is a matter resting in the discretion of the court, and not a matter of right." It is claimed by counsel for the plaintiff that in the case of Malone v. Baihwy Go., 35 Fed. Rep. 625; of Short v. Railway Go., 34 Fed. Rep. 225; and of Hakes v. Burns, 40 Fed. Rep. 33,-it has been held that notice was necessary. These cases were decided before the decision in Be Pennsylvania Co., 8Upra, had been made; and consequently these cases, even if they held that notice was necessary, would not be controlling. These cases, however, do not hold that notice is necessary. In the case of Malone v. Railway Go., 8UpNi, Mr. Justice HARLAN, on page 629, said: " Altlioligh such investigation or examination is not required by any express words 9f. the statute to be had upon notice to the party against whom the re:moval is asked. such notice will bellt accomplish the object Yo' hich congress had in view." The lelirn'ed judge was of the opinion that notice was not necessary, but that itwas the better practice to require it. In this opinion IfuUy concur.. In the case of Short v. Railway Co., supra, Justice BREWER, then circuit Judge,said: "Under the local prejudice clause, no petition need be filed; all that is reqUired is that it shall be made to appear to the circuit conrt that, from·pre} udice or local inflnence. the pl1rty will not be able to obtain justice in IHlch state court; and this shOWing may be made by affidavit, and. if this a specific averment, it is prima facie evidence of the and throwll .tIle case into this court, leaVing the othef party to challenge its truth." ".;" In the case of Hakes v. Burns, supm, the qnestion was as to the form and sufficiency of the affidavit, it being admitted that a removal. based on a sufficient affidavit,.would be good without any notice. I am aware of no case in which it has been directly hpld that notice was jurisdictional. The question has ·been often raised whether it was not the safer and better method of procedure to require notice, and on this question agreement of opinion in favor of notice,-notas there has been a necessary, but to avoid an improvident removal. The motion to remand proceeds in part on the theory that the plaintiff has a constitutional right to be heard, and hence a constitutional right to be notified of the applieation, and that, not having had any notice, the order of removal is wholly void. The conclusion would be unanswerable, if the premises were correct. It is too late,however, to claim any such constitntional right. The old removal net permitted a removal on an ex parte affidavit without notice. The cases which hold, either directly or by necessary implication, that the plaintiff' has no constitutional right to notice of theapplication for relnoval on the ground of prejudice or local influence, numerous. The following either directly decide the question, or at least bear strongly upon it: Ffsk v. Henari6, 32 Fed. Rep. 417; Hillsv. Railway Go., 33 Fed. Rep, 81; Dennisonv. Brown, 38 }i'ed. Rep. 535; Amyv. J'/anning, Id. 536, 868; Short v. Railway Co., 34 Fed. Rep. 225; Malon-ev.
778
FE'DERA.r.. · lliIi1i'ORTER,
vol. 51.
:Rdiluia.yOo,,'85 Fed. Repd>2ii; JRheld,nv,. Railroad 849; 'l!uskins ",.: IM,iIUJh1PCO;, 37 Fed. Rep.!504; d1itmber. Co. v. Holtzclaw, 39 l!'ed.Rep. 578; Hakes v. Burns, 40 Fed. Rep. 33; Minnick v. Insurance Co., ld. 369; Cooper v. Railwa'IJ 42 097; Brodht;ad v. Shoema!cer, 44 Fed. Rep. 518; '. Walcott v. Watson, 46 Fed. Rep. 529; Smith ,v. Lumber Co.,Id.819j Carpenter v. RailwuyCo., 47 Fed. Rep.., 535; Adelbed CoUegev:. iToledo, etc., Ry. ,, It is, further insisted v(tdtied petition does.not state facts sufremoval. No good purpose ficient·toconstitute a prima facie would! be subservedby,setting out the Pf;ltition, or hy giving its subi.I have cartfullyexamined it; and entertain no doubt that the case. The case ofBmith v:, lAllfTWm-: Co., 46 Fad. Rep., 819, l:lthibits facts similar in their essential those in the case at bar. The court in that case, sustained an order of removal. furtl1er,qlai,ms Cause shouldpe reD;lBnded, bethe is a ,neceI\sary party, ap,d is a citizen of the same state with the plaintiff. It is shown affirmatively, both in the in the petition, for removal, that the de:fl1ndant Irwin is plaintiff either a stakeholder, or is interested on the same and to the .. In such a ease 1 the party have rem9.vedWlthout regard to the CItizenship of other defeqdant>!, whose interests are, nominal, or adverse to the party seeking a reRloval. The case Of Bacon v. Rives, 106 S.99, 1 Sup. thatlln1person interested as a mere stakeholder, or Ct. Rep; positli)l1of a garnishee, is not a party whose presence, one if hebe a citizen. of the same state with the plaintifJ'.will defeat the right of his codefendant, with whom the real controversy exists, to remove the and resting on the. a.uthority of the above cause. To the same case, is the case of Hr8tNat. Bank v. Merchants' Bank, 37 Fed. Rep. 657; of AnderlBonv.,Bowet'8, 40 Fed. Rep. 703; oLMyer8 v. Murray, 43 Fed. Rep. 695 ;\of Brown v. Murray. Id. 614; and of Wilder v. Steel & Iron 00.,46 Fed. Rep. 676. ,Co'l1,rts have regard to the substance of the issue. and the right of removal does not depend upon the ,position of the parties on the record. Otherwise the plaintiff would always have it in his power to defeat the right of removal. Inasmuch: as the plaintiff had no right to nouce of the application for rerrloval;itfollows that he has no right to file counter affidavits, after a removal has been adjudged. ,It is a matter ofBound discretion, and the powerof the court to permit· counter affida,vits to be filed ought to be cautiously exercised. Such leave never should be granted, unless a very strong case is shown for asking the courLto reverse itsjudgment awarding,aremoval. kmotion for leave to file co.nnter'affidavits is, in effect, anlipplication totibe 90urt for. a' rehearing. without showing cause. This is ,theview;taken by the court in the' recent'caseof Adelbert College v. Toledo, etc., Ry. co., 47 FeJ. Rep. 836, construing the prejudice and local influence clause of the statute. In that case, a removal had heenotdered.ol1; affidavitssimplystatillg the existeaceof prejudice and
779
local influence which would prevent the defendant from obtaining justice in the state court. The affidavits closely followed the language of the statute. In overruling a motion to remand, the court said: "It having been maue to appear to this conrt, in December, 1890, that from prl:'jutlice or local influence the petitioners for removal cuuld or would not be able to obtain justice in the state courts, and the order for the removal of the suit having been made, it would not be proPPf now to receive or consider COll\}ter affidavits denying the existence of any such prejUdice or local inflllenCe, and thus raise an issue on the facts. The court, in the exercise of a legal discretion, having been satisfied with the p1'ima facie showing made by the petition for removal and accompanying affiJavits, its action in ordt>ring the rt>moval cannot be propally called in question, or be set aside thereafter upon affidavits disputing the fact of the existence of prejudice or local influence." The case of Chrpenter v. Railway Ca., .47 Fed. Rep. 535, holds that, on a motion to remand, the court will not permit the order of removal to be overhauled on counter affidavits. Whether, in any case, the filing ·of counter affidavits will be permitted must be left tg the sound discretion of the court. It ought not to be allowed, unless it is clearly made to appl:'ar that the court has been imposed upon or misled. Here no such showing is made. For these .reasons the motion to remand and the motion for leave to file counter affidavits must be overruled. 2. The complaint in this case is in two paragraphs, for the rescission and cancellation of a contract, and to recover possession of a note. The defendant Corning has demurred to each paragraph for want of facts. The first paragraph alleges that on the 3d day of April, 1891, the plaintiff and defendant Corning entered into a written contract, which is made part of the complaint, by the terms of which Corning sold and translerred to plaintiff, for $30,000, certain patents for an improvement in haling presses. The grounds on which a rescission is sought are as 10110ws: "Plaintiff avers that said Corning, In order to induce him to enter into said contract. and make said callh payment, and assign said note, falsely and fraUdulently represented to plaintiff that said pretended improvement was his own invention, and was not covered by any prior patent, when In fact a patent had been granted on the same improvement to anuthel' person some time previolls to the j;tranting of the lIaid patent to said Corning, and the said pretended improvement of said Corning was an improvement on said prior patlOnt; that said representations were false, and known to be so b)' .said Corninj;t aLthe time; that I'lamtiff was ignorant of the facts in regard to said prior patent, aud believed and relied upon said representations. and was thereby induced to enter into said contract, and make said cash pa,>'mtmt, aud a.ssign said note." The plaintiff alleges that the false representations were "that said pretended improvement was his own invelltion, and was not covered by a prior patent." It is further alleged that" said pretended improvement of said Corning was an improvement on said prior patent." The plaintiff thus admits that Corning had invented an improvement in baling presses, and,for aught that appears, his patent simply covered that improvementrbut it is alleged that it was an improvement on said
78()
REPORTER,
prior pateJ;lt. Non constat. the improvement on the prior patent all t1).at he.Qlaimed to be his.,illventioJ1, or represented as not covered by a prior plltent. It does not appear that he represented that any improvemeqt,other than the. one which it is admitted he made, was his own, .and was not .covered by a prior patent. But, as this defect is not discussed, it is not my purpose to the sufficiency of the paragraph on this ground. Counsel for defendant Corning insist that this paragraph is insuffias it alleges, as a ground for rescinding the contract, a concerning. the interference ofa prior patented invention. :with the invention of the defendant, and that such representation is matter>of,opinion, concerning which there can henoactionablefraud, because the court must presume the question of interference to have been derllovor of the or ,the last patent, unless tPEl artiyle or pro,f<;>-\,,"'ihich. the iljlsued)s identisally in form, z:o,alJqcr,!pnp.,appearanceJ() the article or process fOfwhich the prior gnuHed:. Coursel. for plaintiff concede the general rule woe does an' actiona:!,>le wrong, false rep:as,to, m!l:tterljl of.opinil;1I1 or judgment, but they claim that this, case are to be regarded as affirmations of fact, and then,jftalse,that aq action ma,y be maintained upon them. There i;j,nqcertain rule of law by the application of which it can be deterrpined when false representations constitute opinion or m,atterof fact. Each case must, ll1 large measure, be adjudged upon its own ,circ1Jmstances. In reaching its, conclusiontthe .court will take intelligence and situation of· the parties, thegeninforrnatjoll experiep.ce of the people as to the nature and use of theproper:ty, the 'habits l1D<1 methods of'those dealing in or with it, ajl the circumstances of the case, whether the representations 'ought to have been understood as affirmations of fll,ct, or as matters of .or judgment. ':'It m\1st an unusuaLcasewhere a mim who has obtained a patent for. an, invention may not,say that the invention thereby secured is his it does not interfere with any ,prior patent. The patent dffi'c'eis presumed to have so declared by issuing the patent. It is exnIade the duty of the' patent office ,to make a previous examinatlpP,of .its re.cords for the prtrpose of preyeu'ting interferences. Rev. St. V.. I§ 4893. The liE,lSult of anex,floJninatioll, if in favor of the patent;thongh not: final, ought to have sufficient force to justify tho owner· Of the patent ,in saying that there is no interference between his patent and any prior one, unless there is, in fact, on the records of the office, identically similar, which the patent officers havo 9r fral;ldulently,failed to consider, al)d of the defend/;l>nt isshoWll to have had knowl\!dgtJ. The orthjll principle Qan injustice where, as in this case, '3ltempt.h/l.1l been made to have ,the pa,tent set aside as an infringe.and. where, apparently, nq one eXQept the plaintiff has q its valiG-lty. There is no allegation in the paragraph under considera-
no
781'
tion of the nature olthe improvement, except that it is an improvement in baling presses. What the defendant's patent 99vered is not disclosed, and the character of the prior patent ofwhich the defendant's is alleged to be an improvement is not stated. There is no distinct allegation that the prior patented invention is identically similar to that of the defendant, nor that the defendant had knowledge that the prior invention and his own improvement were identical. These considerations have led me to the conclusion that the representations must have been intended and understood to be matters of opinion, and not affirmations of fact. The authorities on this question are not in harmony, nor are they easily reconcilable. In my judgment, however, the above conclusion is supported by the better. reason and the greater weight of authority. The case of McKee v. Eaton,26 Kan. 226, is more nearly in point for the plaintiff than any other case which has fallen under my observation. The complaint in that case contained allegations, in great detail, which the court. held to be statements of fact, and not matters of opinion or judgment. The facts in that case are so different. from the allegations in this case that it yields no support to the paragraph in question. Counsel also cite and rely on Ricke;y v. MorreU, ,1.02 N. Y. 454, 7N. E. Rep. 321; 8 Wait, Act. &,Def. 274; Rose v. Hurley, 39 Ind. 77; iowa Economic Heater Co. v. American Economic Heater Co., 32 Fed. Rep. 735; and Clark v. Edgar, 84 Mo. 106. I have carefully examined thesp. authorities, Ilnd it suffices to say that I do .not think they support the plaintiff's contention. The recent case of Dillman v. Nadlehoffer, 119 Ill, 567, 7 N. E. Rep. 88, is exactly in point upon the proposition that representations regarding the validity of a patent right are matters of opinion, and not statements of fact, for the making of which a suit for rescission will lie. That was a sqit to a sale of patent rights on the ground of false and fraudulent representations in regard to their validity. 'l'he representations are set out in the opinion of the court as follows: "The defendant represented to plaintiffs that said improvements were his own invention, and th;tt the patents isslIed thereon were Renuineand valid, and that they did not conflict with or infringe upon the patents or inventions of anyone, and particularly t.hose controlled by the Washburn & Moen Manufaeturing Company and J. L. Ellwood, or their Heen,sees." The court.,held that represllntations were matters of opinion, and not affirmations of fact, and that they did not constitute such fra udulent statements as weJ:e actionable in a court of equity in a suit for rescission. There is another consideration equally fatal to the sufficiency of the paragraph. The contract sought to be rescinded, which is exhibited with l;tnd made a part of the paragraph, provides for the contingency that the defendant'lil patent may be an infringement on "a .priorpatent, or may pNve otherwise invalid. , The lan,guage of the contract is as fol.... . .. "'ill
"r hereby warrant tbegenuineness and validity of said letters patent, and
defend the same against any and all suits for infringement to the dates
782 filfsaid letters patent;: thll:h!lfred: may necessarily incur, in Rllyway or ill or the genulnen,ess or validity oj' 'the or; In ,apy suits for as ,above stated,will be paid by me, 'and I'shall stand indebted to the said Alfred B. Rei:lvesill said sums; and in 'all suits and actions thatmay"beneooSSary in and about the defense of said lellters patent. and the prosecutions for infringement thereof. the said B. He6,ves shall prosecute or rI)aintain the same in his own name, orin my natU!!.' as, way pe necessary under the laws, subject to the pfQ,visions above stated ito;costs and expenses, II ,
, IIere the plaintiff expressly accElpteda contmct wa1'mnting the genuinenessand validity of the patents, and that they were ndt infringements onpri6r patents. ' He agreedto,prosecute and maintain all such suits and defenSes as weren6cessary, growing out of infringements or otherwise, at the cost and expense of the defendant. The warranty 'covers the whole ground embraced -in the alleged fRJ:se representation, andcondusivl'ly demonstrates that the plaintiff did rely on the verbal statements. but elected to protect himself by an express written warranty. It shows that the contingency of the patents :ultimately proving to be invalid was iIi the minds of both contractillg'partiea,' and tbis was expressly prl)vided forin the agreement. In such a case, the vendor cannot be held liable for a false made prior to the agree'ment; which is fully provided for/and guarded against therein, where appears to show;aB in the <lase here, that the vendor has been guilty ofauyartifice, or of the use of other means, ,to prevent the purchaser from and judging for himself.. Here the hRs·exncted a written 'Wllrrimty carefully pi'otecting himself from injury, ifthe of the defendant in regard -to the validity of the patent should prove unfounded. III such cnse the'purchaser must be content with the security which he has understandingly and voluntarily 'irCoopted. The case of DiUman v.NadlehoJ'e:r, 8Up'l'a is in point, and is deCisive of this propositiOti. There is another rellson why this paragraph is insufficient. It does Dot allege that the plailHiff, prior to the bringing; 101' the snit. returned <>r()tlered to return the patents to thedefendant,an\l thu!> place him in Statu' 'quo,. nor does it 'itI)V suffieiel1t excuse for his lailure so to do. lt is too well settled to before agreement can be rescinded. the plllilltiff nlust have doile all in his power, and with thl! delendnntin statu quo· . -For :these reasons the -paragraph must be heIti! 'bad. , 3. The second of thecotriplaint alleges that, on the 3d day of J\pril,1891, the plaintiff and deJendant Corning entered into a writcopy 'Of w-hich is made part by the tei'iHs 01 which thedefendlmt sold and transfurred to the plaintitf, tor $30,OOO'jcertain an 'impl'ovelllentinbaling presses. The gf'ij\\Wds 'on. which a rescission iss6qkhtare as follows: ; .' '''pta1l1tiff'fttrther avers 'that said cdntrllct was ante'red into; 'ana sl\id MIa· was effected, in the county of Bartholomew, lind state of Indiana; that derfendantCorning has :t.ileclerk o;f thecour,t,uhlaitl county ,copies of said patent,or either,. dUlyauthentioaLed 'or other-j
j'uswi
ll,n
BEEVES
"'J OORNIlil'G.['
,1
783
wise, nor has 'be atany'timemade affidavit bef<Tre such clerk that such let" ters patent. or either them. are genuine, and have not been revoked or and that he has or had full authority ,to barter the ented; nor has he filed such affidavit in the ,office of said clerk, as required by the statute of Indiana!' . -
The provision of the statute relied upon is as. follows: "It shall be unlawful for any person to sell or barter, or to offer to selrur barter. any patent right. or any right which such pe.rs()O. shall allege to be a patent right. in Ilny county within this state, without first filing with the clerk of the court of such county copie\! of the letters patent. dulY,authenticated, and at the same time s wearing pr affirming to an affidavit, before clerk, that such letters are genuine. and have not been revoked or annulled, and that he has full authority to sell or barter the light so patented; which affidavit shall also set forth his name, age, occupation, aud residence, and,if an agent, the name, occupation. and residence of his principal. A copy of this affidavit. shall be filed in the office of said clerk. and said clerk a copy of saidaffldavit to the applicant, who shall exhibit the same tpany person. 011 .. Ind. 1881. § 6054. _ ' ,,,
The sufficiency of this paragraph hinges on the constitutionalitytof the above section.' . Counsel for the defendant earnestly insist that this section of the state statute is iavalid.....,..(I) Because it requires evidence of the contract beyond that provided by congress, and places restrictions upon, the asof the contract, evidenced by the patent, beyond the restrictions established .by sections 4883, 4884. 4898, Rev. St. U. S. 1878, and is therefore in derogation of the right of ·congress "to protnotethe to progress of science and useful arts, by securing for limited authors and inventors, the exclusive right to their respective writings and discoveries." Const. U. S. art. 1, § 8. (2) Becaul'le the statute is in violation of the fourteenth amendment of the constitution of the United States, as ,it imposes peculiar and unreasonable restrictions upon the patentee beyond those imposed upon owners of other kinds ofproperty, and thus abridges the privileges and immunities of the defendant as a citizen of the United States. (3) Because, a!:isuming that the state, in the exercise of its police power, has the right to place restrictions upon the assignment of patent rights, the state statute is for the l1lrotection of the citizens of Indiana against their own tendency to speculation, and is paternal in its characterl-a species of legislation which isrepugnant to the whole theory of our government, and is therefore,unconstitutional. ' First. Aside from the statute"an inventor possesses no exclusive property or right in his invention. Others may appropriate it, and the inventor can obtain no redress in the courts, in the absence of a statute securing to him his invention. and giving him a right of action for its invasion. 'This doubtless grows out of the fact that an invention is an intellectual conception, and exists simply in notion, and in its nature is incapable of corporeal possession. In view of this fact, and, to stimulate and reward inventive genius, the constitution conferred upon, congress-the power to to inventors, for limited times, the exclusive
784
REPORTEB,
right to' theh' discoveries,.......not asa monopoly, but as'a fair recompense for themb6t'and expense 'incurred in producing and perfecting their inventiops; Congress, atan' early day, gave practical effect to this constitutiortat provision by the enactment of a system of pl,ltent laws, which, with some changes and adrlitions, yet stands upon the statute book. The right secured by a patellt is a covenant by the United tltates that it will, through:,its, courtB',extllude all persons from making, using, or vending the thing invented. The patent iteelf iseimply the evidence of tbe.'cohtraCt which is executed to give effect to the right created and .. right is assignable, because congress :has, ,SQ St.'. S. 1878,§ 4898,) li1{e other contract right,s.,Np Jegis)atiop.,hpw@:ver, was necessary tqmake the right assignable ,when ,it had been;:made property. An ipventiun,securedby' patent is property, and as much entitled to 'protectionas otherpropetty. (J]JYl1meyer v. Newton, 94U.S. 225. The right otthe' patentee, u'nder'letters patent for invention grrtnted by the United States, is exclusive of the government, as well as all others; and-the government cannot use the patent without a license or compensation to the owner. James v. Campbell, 104 U. S: 356. The patentedproductsof the-invention become tangible property, and fall within the;commondiass, whiIe:theeonception of the mind embodied in the iaventionand secured by the patent becomes clothed with the attributes of incorporeal property. ,As: to the tall!?:ible products of an invention, His se);tled case of Patterson v. Kentucky, 97 V. S. 501, that they fall within' the domain of the police power of the state. That species of property is subject to taxation; and to the payment ·of debts, as other personal property. The national power will be fully satisfied if 'the property created by the patent be, for the time beirig, enjoyed and used exclusively, So far as under; the po] icy of the several states the property . shall be deemed fit for toleration and use. There is no need of giving this power. any broader construction in order to attain the end for which it was granted. While the tangible products of an invention, like other tangible prop-erty,are subject to the police power of the state, it is claimed that the incorporeal property created and secured by the statute in the invention itself does not -lie within the domain of the police power of the state. Americanconstitutiorial system the power to establish regulatioas'of police' has been left with the states, and cannot be assumed by the national government." Cooley, Const. Lim. 574. "As the federal legislature cannot en'act police regulations which will yield the citizens may enof the state just 'Protection, 'it, must be that the state 'Rct such legislation, or the citizens beleft without protection." New v. Walker, 108 Ind: 365, 9N.JD.Rep. 386. in tbis power is embraced 'what Mr. Chief Justice MARSHALL, in Gibbons v.Oyden,9 "Yheat. 1, calls·that "immense mass of. legislation which embraces everything within the territory of the state, not surrendered toiha general govel'll,mentjall which can beillost advantageously exercised by the states themselves." ,The police power is one of wide scope, whose limits are
an
REEVEi\
tl. CORNIKG.
785
susceptible of no precise definition. Blackstone defines this power to be"The due regulation and domestic order of the kingdom, whereby the inhabitants of a state, like members of a well-governed family, are bound to conform their general behavior to the rules of propriety, good neighborhood, and gOOd manners, and to be decent, industrious, and inoffensive in their respective stations." 4 BI. Comm. 162. Judge Cooley says: "The police power of a state, in a comprebensive sense, embraces the wbole Elystem of internal regulation by which the state seeks. not only to preserve the puhlic order and to prevent offenses against the state, but also toestabUsh for the intercourse of citizens with citizens those rules of good manners and good neighborhood which are to prevent conflict of rights, and to insure to each tbe uninterrupted enjoyment of his own, so far as it is reasonably consistent with a like enjoyment of rights by others." Lim. 572. Mr. JusticeHARLAN, in Patterson v. Kentucky, 97 U. S. 591, ,"By the settled doctrine of this conrt, the power extends, at least, to the protection ,of the Iives,the health, and the property of the community against the injudicious exercise by any citizen of his own rights." 'The of the citizen from Jraud and imposition evidently falls just limits of the police power. This power reaches all persons things within the state, and it may be rightfully exercised by the state over them, unless the power is denied by constitutional limitation, or by an act of congress, or a treaty made pursuant to the constitution. The right of the state to make reasonable police regulations to protect the purchaser of the incorporeal property created by the la}Vs from fraud and imposition in its sale is not denied to the states in express terms, either by the federal constitution or by the laws enacted by congress. This power originally .and inherently beto the states, and it yet remains with them, unless impliedly taken l:tway by a fair construction of the constitution, or the laws enacted in pursuance thereof. Whether this power may be exercised by the states in regard to patent rights depends on the object, purpose, and scope of the patent laws. "The sole object and purpose of the laws," said Mr. Justice MILLER: (In re Brosnalwn, 18 Fed. Rep. 62,) "which constitute the patent and copyright system, is to give to the author and the inventor a monopoly of what he has written or discovered, that no one else shall make or use or sell his writings or his invention without hi3 permission; and what is granted to him is the exclusive right; not the abstract right, but the right in him to the exclusion of everybody else. * * * The purposes of the patent law and the constitutional provision are answered when the patentee is protected against competition in the use oLhis invention by others, and when the law prevents others from on his exclusive right to make, use, and sell the object to be accomplished. This proposition is fully supported by tl!,e preme c01}.rt in the case of Patterson:v. Kentucky, 97 U. S. 501. That case all'lo .cites with approval the following language of. the supreme court orOhio in the case of Jordon v·. Overseers, 4 Ohio, 295: 'The
v.51F.no.12-50
786
J'EDERALREPORTtlt, vol. 51.
bperatibn of the statutes [the piiJnt to ehtble him [the inventor] others frqm using the product of his labors, except with his But' his'oWn right bfus'h1J;t<1S' not enlargeu,braffected.: There . :c\Hzen, tpe, ,to. m.nnage' his or to hIs to the paramount claims of society, that his may be modified by the exigencies of the community to which he belongs, and ,it, to welfare, if held, The prlOclple IS lU Webber v. The"section 'inquestioll' in noway !conflicts with :this, exclusive right. 'to exclnd60tpers iSllS and can'beR$ 1 lldily and as1:l/ifore; Hie passage of the law. It imposes r\'o"hardship on hdtiest dealers;; and, if it hiMel'S dishonest ones, more the approVal.of the corirt,'. tnno just sellee IS It }:ioetite. to patent 'ngbts. Its 'req1l1rements are sImple and easy of '"All' that IS tbat' the' seller tJW'l'Eltters authentIcated, apdat same time make andflIean affidaVIt that the letters are is, or a?d, riot .been tevokedor atlllulled.' Itdoee' ndt hln1.'tO stllte that,there IS no itWimtfon, nor that tbeartiCIe or proC'css patettt6!:t'is one'for,WliilJha validpatentrhight l:ieissued ... It does not n'simply cQrrlpel/! an exhibition or!the' sbttrcEH>ftitle,:and a of the thing offered forsale. It cilsts"n6 iiliputatiol.f :6f dishoneSt'y 'on the owners of 'patent rights. Isol by requiring a publi:c conveniently accessithem, alid tQ inspire them with' confidence ble to' purehasers,to in' the /and ,thu.s ito facilitate, rather than Mtider, honest traffic. It is a 'matter ofcomfijouknowledge, recQgnized alike by cotltts and legfatent rights have beenue/ed as a' prolific instrument of fraud: aildbnposition." IA just measure of protection renders some law, Qomestic,apd local in its:chill'actlir, a matter of propel': legislative cognizance. grant of power to congrbs!l enabling it to protect pU,rchasetS; The 'exerei'se of thiepower by bongress is but incidental, 'iflirall,under to inventors." Congress 'has no power, implied, 'to give measureofprotection. The registry jn 'its own records. It most it ci:slJld do w;ould could not' in state records.·' Hence, if any. power it resides1with and must be provided by the to states, ' r thinll'such power exists in the state. The' provision in questionafl'ords stich protecfiop to whilen imposes no unjust It deprives the,owher l;>'f a patElIltof no right his <jwh',nor doe'S it, ibanyjust sense; discriminate agilJpst ViEl oW-tiers of patent rigfits." "," " '.' . '' ' " ' , The case-s, ,!;n ,the state denieq"this power to the nndrested otftheauthority :()f theease of Ex parte states Robinsoh; 2 :.eias.'309. Followihgthis case,'thesupreme'courtof this
U.
",
'
e
:.!'
787
state, in Mfwhine Co. v. Butler,' 53 Ind. 454, held the provision in question unconstitutional. In Breechbill v. RandqJ/" 102 Ind. 528, 1 N. E. Rep. 362, the court, without dissent, ex;pressly overruled the above case, and affirmed the validity of the section in question. The decision ill Breechbill v. Randall, 8upra, is bottomed on the ground that the case f)(Ex part{. Robinson, 8upra, has been overruled by the case of Patterson ,v. Kentucky, 97 U. S. 501. I think the court is correct in holding that the case of Ex parte Robinson has ceased to be authoritative, and is in effect in conflict with the doctrine of the case of Patterson v. Kentucky, 8upra. The case of BreechbiU v. Randall, 8lLpra, has been affirmed and followed by the supreme court of this state in Hockett v. State, 105 Ind. 250, 5 N. E. Rep. 178; New v. WalkeT, 108 Ind. 365, 9 N. E. Rep. 386; Hankey v. Downey, 116 Ind. 118, 18 N. E. Rep. 271; Rape v. Wright, 116 Ind. 502, 19 N. E. Rep. 459; and Tescher v. Merea, 118 Ind. 586, 21 N. E. Rep. 316. The appellate court of this state has also affirmed the constitutionality of the provision in question. Robertson v. Cooper, 1 Ind. App. 80, 27 N. E. Rep. 104. Our attention is called to the case of (',astle v. Hutchinson, 25 Fed. Rep. 394, where the second section of the statute of Indiana, requiring the seller of the patent tQ write the words, "Given for a patent right," in any note given for a patent right, and making the failure to do so a criminal offense, was held to be unconstitutionlll. This decision mllY well be supported on the ground of an unjust and unauthorized discrimination. It siQgles out notes given for patent rights from the common mass of such property, and requires them, to be valid, to show on their face ,the nature of their consideration. Such discrimination would seem to ren'!er the second section of the statute unconstitutional. If the section had required all notes to exhibit on their lace the consideration for which they were given, a very ditl'erent question would ha\'e been presentE'd. In my opiniou, the calle of Castle v. Hutch,.. inson, 8upra, is correctly decided; but it by no means is decisive of the question under consideration. In the section before me there is an entire absence of hostile intent, either in the language employed, or in the circumstances giving rise to its enactment. It in no just sense discriminates against the owners of patents. It is uniform in its operation. It applies alike to foreign as well as domestic patE-nts; to all citizens of Indiana, as well as to all residents of other states and countries; to all sellers of patent rights, whether as owners or agents. It applies to patent rights alone, because, unlike promissory notes given for patent rights. there are no other rights which can be put in the same category, or which experience has shown to require the same police regulation. They are the only species of incorporeal rights which can bl' regulated in the manner provided by the statute. The lawmaking power must be the ju<lge of the necessity of police regulations forany of property. When it recognizes the necessity.and.ap,plies the remedy, the law mnnot be adjudged invalid, merely it applies toa particular comllJodity, or to the sellers of that cu,r;nmodity. PoweU v. Pennsylvania, 127 U. S. 678,8 Sup. Ct. Rllp.
FEDERAL REPORTER,
992, 1257:" considerati6lis me to the conclusion that the proviSion in' is not invalid _as being in conflict with section 8 of arliclel of'the constitution of the United States, granting to congress the power'to secure to inventors the exclusive right to their discoveries, nor with the laws passed in pursuance thereof. Second. -The statutory provision in question is not fn conflict with the fourteenth a.tl1endment of' the cOllstitution of the United States. It imposes no pebuliar or unreasonablerestrictiolls upon the patentee, nor does ifinahymanner abridge theptivileges ahd irnhlunities of the dea citizen of the United States. This provision is a legitimate exercise?f the police power of the state for the prevention of fraud, and is not inconsistent with the constitutional provision or the laws relating to It is the settled d.octrine of the supreme court that, as governm\mt'ill organized for the.purpose, among others, of preserving the pub11c morals, and preventing fraud and injury, it cannot divest itself ofthe'pchver to provide for objects; ahd that the fourteenth amendmehtwas not designed to interfere with tlie exercise of that power by the state. ButCher8' Unton Slaughter':'House Co. v.Crescent City, etc., Co., 111 U;:S. 746,4 Sup.Ot. Rep. 652; Barbierv. Connolly, 113 U'" S. 27,5 Stll>. Ct. Rep.357j Yicle W6 V. Hopkins, 118 U. S. 3Ei6; 6-Sup. Ot. Rep.1M\l; ftfugler v.Kan8a8, 123 U; S. 623, 8 Sup; CkRep. 273; Powell v. 127 U. S. 678, 8 Sup. Ot. Rep. 992, 1257·. The case last cited! fully discusses the scope of the fourteenth· alI1endnlent, and clearly shtYWS 'that itddes not limit the proper exercise of the police power of the 'states. As there can be no doubt that the ptevention of fraud '{allsw"ithiIi. the narrowest definition ofthe" police power,ll·it would seem to· be clear that the statute in question does ndt conflict with that . Third. tittle need be said in respect of the contention that theprovision Of the state statute is for the protection orthe citizens of Indiana against 'their own tendency to speculation, and is paternal in its character, and is \lspecies of legislation repugnant to the theory of our ernment,and is thereforeunconstitu'tional. It is a doctrine as novel as it is unsound that the COtlrts are clothed with rightful power to adjUdge a statute, 'duly enacted, unconstitutional on the sole ground that the court mny tnink thafthe legislation in question does not conform to our theory of government.: Should sl1ch'a ·deviatidn occnr, its correction belongs,tb' lthe people, and the appropriate remedy is to be sought through theballoVbox'; The highest exertion of judicial power is it1\'oked when a court is balled upon tonltlIify the solemn act ofa co-ordinate depait.It is a.power to be exerclsed with great caution' and reluctance. 'It should never be exercised ,unless the court feels an thestatute in question is in clear -and'pal.:. :rable cbtiflict'with the,constitution. StIch is not the case here. .The as':' sumption that the provision under 'ls:peculiar or unusual, because it'!!leeks t6 .check improvidence; is withouFfoundation. The statutebdoba.bdtmd with instancesdflegislntion having this object in view, whosepfopriety and validity are unquestionable. The laws reH
SMALL, V. WESTClIESTER FlBE W. CO.
789
straining the use of intoxicating drinks,those against betting on gUUles of chance, and those forbidding dealing in options, are instances oflegis. ]ation of a paternal character, and are aimed to restrain the popular hah· its of improvidence and speculation. In my opinion the second para· graph states a good cause of action, and the demurrer thereto is overruled.
SMAU, .". WESTCHESTER FIRE INS. (Circuit Court, D. Indiana.
Co.
August 6. 1892.)
No. 8,203. 1. FIRE bSPRANCE-TITLE TO
A policy of insurance on personai property was conditioned to become void'if 'the title or possession of the properW should "be now, or hereafj;er become, involved in litigation," unless consent in writing was indorsed thereon by the company. The policy and the property were to a bank, and the company gave its consent in writing to the transfer of the policy. A judgment creditors' bill was brought against the insured, and the bank was made party thereto, and was ,adjudged to hold the property in trust for the plaintiffs in the bill, but, becoming insolvent pendente Ute, a receiver was appointed. The insured property.was dllstroyed by fire after the suit, aud before final decree. Held that, byconseuting to the transfer of the policy, the company impliedly consented to the transfer,of the property insured thereby; and that the creditors' suit did not involv,e, either title or possession, within the meaning of the condition. , When the fire occurred the company became liable to the bank, and the subsequently appointed receiver could recover on the policy, as, after the fire, it became a chose in action, and assignable without the company's consent. . The decree appointing the receiver did not operate by relation so as to vest the title in him as of the date of the commencement of the suit, and before the fire and hence could not be considered a violation of a condition against any change of title without the company's consent. ,
AGAINST LITIGATION.
'2.
SAME-TRANSFER OF POLICy-RECEIVERSHIP.
3.
SAME.
,4,. SAME-VALIDITY OF CoNDITION-PuBLIC POLICY.
A condition in an insurance policy that it shall become void if the title or possession of the property is, or shall become, involved in litigation, is not against public policy, butIs intended to protect the insurer from carrying insurance on property where the title or possession is so doubtful as to become involved in litigation; but such conditiOu does not apply to litigation involving no question of title or possessionadve\-seto that of the assured. In an action in a federal court on a fire policy issued within the state, and on property'there situated, by a foreign insurance company, it will be presumed, nothing apvearing to the coutrary, that the company has complied with the statutes the conditions upon which foreign insurance compllnies may do business within the state; and the validity of conditions containetl in the policy must therefore be determined by the state law. , ,
,5.
SAME-FOREIGN COMPANIES-PRESUMPTIO-SS.
SAME-CoNDITIONS LIMITING TIME OF SUIT.
Where the statute of a state tRev. St. Ind. § 3770) relating to foreign insurance companies provides that no condition in a fire policy shall be valid which pro'hibits the bringing of a suit thereon after the expiration of any period less tllan three years, a,condition in a policy in viOlation thereof will be held void by the federal courts. " An agreeD;l,ent in such case tllat, if suit shall be brought afj;er the expiration of one year, the,lapse of time shall be deemed conclusive evidence against the validity of the claim,is equally invalid, 88 it attempts to ',accomplish by indirection what is expressly ior'E!idden by statute. '.' " ,
"1.