Alexander v. American Encaustic Tiling Co.

manufacturers were permitted to use said invention with the knowledge of, and without protest or license from, said patentees. For a first counterclaim it is alleged that defendant, believing that said patents furnished protection, paid the rates provided in the agreement; that the patents were not for the making of circular tile or pasting said tile on paper, but were for an alleged design for a tile and an alleged improvement in tiling; that since the agreement defendant has not utilized the design for a tile or improvement on tiling, but only-manufactured circular tile, pasted them on paper, and sold such tile since March 14, 1902; that defendant’s payments, aggregating $7,-673.87, were received by the patentees with knowledge that they were made solely for making and selling circular tile; and that defendant was not using the design or improvement in tiling covered by such patents. Wherefore said payments were by mistake and without consideration. For a second counterclaim it is alleged that numerous parties other than plaintiff, and not licensees, were permitted extensively and successfully to use the alleged invention in open defiance thereof, with the knowledge of and without protest from the patentees or their assigns; that since March 14, 1902, defendant paid plaintiffs as royalties $7,673.87, which payments were for the right to use said inventions, exclusive only of the right of plaintiffs under, and those who might be licensed pursuant to, the terms of an agreement, which right was not obtained by the defendants; and that said payments were without consideration. Judgment is demanded for $7,673.87.

Plaintiff demurs to the first, second, and third defenses as insufficient in law upon the face thereof, and to the first and second causes of action or counterclaims as not stating facts sufficient to constitute a cause of action. The agreement gave to plaintiff’s assigns the right and option forthwith to terminate it upon notice, at which time all rights of the defendant should cease. Ño license to any other manufacturer was to be granted of the same extent at less than the rates specified. All tile manufactured or sold by the defendants to be stamped “patent” or “patented.” Plaintiff’s assignor expressly reserved the right to manufacture and deal in said circular tile, and said agreement was not to be “considered an exclusive license,” and plaintiff’s assignor was permitted “to license at its option any manufacturer other than defendant to make and sell circular tile under said patents or either of them.” The third paragraph of the agreement reads as follows:

“The said party of the first part [plaintiff’s assignor] hereby further agrees to use reasonable measures for the protection of each of said patents and to promptly inform the said party of the second part [defendant] of the nature of any litigation that may be instituted to determine the rights of the said party of the first part under either of said patents; but it is mutually agreed and understood between the parties hereto that said firm [plaintiff's assignor] shall in no way and in no event be held responsible to the said company [defendant] for any loss or damage which said company may sustain in case of an infringement of said patents -or either of them by any party or parties, or in the event that said patents or either of them shall hereafter be declared invalid.’’

The fourth paragraph provides that, if the patents or either of them shall be declared invalid by any final judgment of any court of competent jurisdiction of last resort, the agreement shall terminate; and,

further, the defendant covenants to recognize the validity of the patents, to protect plaintiff’s assignor thereunder, and to take no action directly or indirectly to the impairment or detriment of the interests of said patentee. A contract giving a licensor greater scope or more thoroughly binding the licensee could hardly be devised. Defendant made payments under the agreement for about seven years, and so long as the patents are not declared invalid by a court of competent jurisdiction of last resort their validity may not be attacked collaterally by the defendant during the term or under the conditions of this contract.

The averment that plaintiff did not use "reasonable measures” to prevent others not licensees from using their patents is a conclusion. No monopoly was intended to be granted, nor is the agreement void as against public policy. Defendant expressly took the risk of infringements. No remedy for the reformation or annulment of the instrument for fraud or a misrepresentation or other causes is sought. It seems to me that, while this contract is in force, defendant is bound to its performance, unless, irrespective of the validity of the patents, its breach by the plaintiff is alleged and shown. If defendant did not manufacture the articles alleged in the complaint, it may so show by a proper plea without attacking the patents. If plaintiff has not used reasonable measures for the protection of these patents (assuming that the word “protection” means the use of said articles by others than licensees; i. e., infringers), defendant may by rescinding and alleging and proving necessary facts recover damages.

In my opinion, the demurrer to each of the defenses and to each of the counterclaims should be sustained, with costs, with leave to the defendant to answer over, without alleging the invalidity of the patents or the manufacture thereunder by the .plaintiff or other licensees.