Herdic v. Roessler — 14 N.Y. St. Rep. 819

Majority

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Frank L. Herdic, App’lt, v. Charles Roessler, Resp’t.^[1]

(Court of Appeals,

Filed April 10, 1888.)

Headnote

1. Constitutional law—Bills and notes—Notes given por patents— Laws 1877,' chap. 65, constitutional under U. S. Constitution, art. 1, § 8.

Laws 1877, chapter 65, which requires that whenever any promissory note or other negotiable instrument shall be given, the consideration of which shall consist in whole or in part of the right to make, use or vend

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any patent invention or inventions * * * ' the words “ given for a patent right ” shall be * * * written or printed on the face of such note or instrument, etc., is valid and does not contravene the Constitution of the United States, art. 1, § 8.

3. Bills and notes — Effect of leaving off words “given for a PATENT RIGHT.”

The said statute does not make the note illegal although the statutory words are omitted, nor does it take from a bona fide transferee for value before maturity, without notice of the consideration, the protection accorded to commercial paper by the law.

3. Patent laws do not interfere with power of state to pass police laws.

The patent laws do not interfere with the power of a state to pass laws for the protection and security of its citizens in their persons and property, or in respect to matters of internal polity, although such laws may incidentally affect the profitable use or sale by a patentee of his invention.

4. Same—What right given by patent.

The right of a discoverer to sell his invention is not derived from his patent.. What he obtains by his patent is the right to exclude others from selling or using his invention for the period specified, the right to sell or use which would, except for the protection of the patent laws, be open to all the world.

Appeal from a judgment of the supreme court general term, fifth department, affirming a judgment in favor of the defendant entered upon the verdict of a jury and from an order denying a motion for a new trial.

The verdict of the jury sustained the defense of failure of consideration of the note. The consideration was the •sale by the payee to the defendant of the right to make, use and vend a patented article, under an invention patented by the payee, and of a collateral agreement on his part, to promote by means of orders and in other specified ways, the business of the defendant. The words, 11 given for a patent right,” were not written or printed in the note .as required by the act, chapter 65, of the Laws of 1877. The note was in the ordinary form of commercial paper, and was given, dated and payable at Buffalo in this state, where the defendant resides, and where the agreement was made in pursuance of which the note was given. It was -subsequently, before maturity transferred by the payee to the plaintiff in the state of Pennsylvania, where the parties to the transfer resided. It was claimed and there was evidence tending to show that the plaintiff paid value for the note, without notice of any defense, but it was proved and found by the jury that he had notice when he purchased it, of the consideration for which it was given. The defendant was permitted, against the objection and exception of the plaintiff to read in evidence a statute of Pennsylvania, similar to the statute of New York above-referred to. The plaintiff requested the court to charge the jury that the statute, chapter 65, of the Laws of 1877, was

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unconstitutional and void. The court refused to charge as requested, to which refusal the plaintiff excepted.

Truman C. White, for app’lt; J. M. Chipman, for resp’t.

The validity of the statute, chapter 65, of the Laws of 1877, is the principal question in this case. It is entitled, “An act to regulate the execution and transfer of negotiable instruments given for patent rights.”

The first section declares that "'Whenever any promissory note or other negotiable instrument shall be given, the consideration of which shall consist in whole or in part of the right to make, use, or vend any patent invention or inventions claimed or represented by the vendor at the time of the sale to be patented, the words, “ given for a patent right” shall be prominently and legibly written or printed on the face of such note or instrument above the signature thereto; and such note or instrument in the hands of any purchaser or holder, shall be subject to the same defenses as in the hands of the original owner.” Then follows a. provision in the second section to the effect that if any person shall take, sell, or transfer any promissory note or other negotiable instrument, not having such words therein, knowing the consideration of such note or instrument to consist in whole or in part of the right to make, use and vend, any patent invention, shall be guilty of a misdemeanor. The constitutionality of the act is assailed on the ground that it is in contravention of article 1, section 8, of the constitution of the United States and the acts of congress enacted in pursuance thereof, which secure to a patentee for a limited time, “the full and exclusive right and liberty of making, using and vending to others to be used,” his invention or discovery (5 U. S. Stat. at Large, 117). It is insisted that the statute of the state operates as an unlawful restraint upon the right of sale conferred upon the patentee by the acts of congress. This question has been considered by the highest court in the states of Pennsylvania and Ohio, under statutes substantially like the statute in this state, and m the opinions delivered the constitutionality of the legislation was maintained. Tod v. Wick, 36 Ohio, 370 ; Haskell v. Jones, 86 Pa. Stat., 173.

The plaintiff, however, in opposition to this view, cites several cases (exporte Robinson, 2 Biss., 309 ; Woolen v. Banker, U. S. Ct. Court, S. D. Ohio, Sawyer, J.; in re Lake, U. S. Ct. Court, N. D. Ohio, Matthews, J.; Cranson v. Smith, 37 Mich., 309 ; Wilch v. Phelps, 14 Neb., 134 ; State v. Lockwood, 43 Wis. 403 .

The leading case, ex parte Robinson, arose under a statute of Indiana, making it unlawful for a person to sell or offer to sell any patent right within that state, without first filing

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an authenticated copy of the letters patent, with the clerk of the court, and at the same time making an affidavit before the clerk that the letters patent were genuine and had not been revoked or annulled, and that he had full authority to sell, etc.

It was held by Mr. Justice Davis, sitting at circuit, that-the law then in question was unconstitutional and void, as an infringement upon the right of sale secured to a patentee by the letters patent. The other cases mentioned are founded mainly upon the authority of ex parte Robinson. It will be observed that, even if that case was well decided, it would not necessarily determine a case arising under our statute, which does not undertake to impose conditions upon the right to sell a patented invention, but simply prescribes that if a negotiable instrument is taken upon such sale, the words, ‘' given for a patent right,” shall be inserted, and subjects the note to defenses existing against its-original holder, notwithstanding its transfer.

The supreme court of the United States, in a recent case (Patterson v. State of Kentucky 97 U. S., 501 ), had occasion to pass upon the validity of a statute of Kentucky, which prohibited the sale in that state of Kentucky, of illuminating oils not bearing a prescribed test.

The plaintiff was the patentee .of an oil which, if the statute was valid, could not be sold in Kentucky, as it could not be made so as to conform it to the statute standard. It was claimed that the law was an invasion of the right secured to the patentee by his patent to sell his invention.

The opinion of Mr. Justice Harlan in this case, upholding the statute in which the court concurred, is an able and satisfactory exposition of the doctrine that the patent laws do not interfere with the power of a state to pass laws for the protection and security of its citizens m their persons and property, or in respect to matters of internal polity, although such laws may incidentally affect the profitable use or sale by a patentee of his invention.

The supreme court of Indiana, after the decision in Pat terson v. Kentucky, affirmed the constitutionality of theTndiarm. statute, reversing its previous decisions to the contrary founded upon ex parte Robinson. Brechbill v. Randall, 102 Ind., 528 ; New v. Walker, 108 id., 366.

Under this state of the authorities we feel at liberty to-declare our concurrence in the views expressed by the courts of Ohio and Pennsylvania upon the general question.. The right of a discoverer to sell his invention is not derived! from his patent. This right would exist although no-patent laws had been enacted. What he obtains by his patent is the right to exclude others from selling or using-

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his invention for the period specified, the right to sell or use which, would, except for the protection of the patent laws, be open to all the world.

The statute of Hew York now in question, in no way interferes with this exclusive right. A state law directly infringing this law would unquestionably be void. The law of congress and the state law are not in conflict. The object of one is to secure to the inventor an exclusive right to use or sell his invention, and the object of the other is to protect against fraud in sales. The state law operates upon the thing taken for the right sold, when that is a negotiable instrument, by requiring the consideration to be plainly expressed, and thus, subjecting the instrument, when transferred, to the same defenses in the hands of the transferee, as in the hands of the original holder. The statute does not make the note illegal, although the statutory words are omitted, nor does it take from a bona fide transferee for value before maturity, without notice of the consideration, the protection accorded to commercial paper by the law merchant. This is the view taken in the case first cited, and is, we think, the true construction of the statute. It is impossible to say, even, that the statute operates to the disadvantage of the patentee. It may restrict the currency of the paper taken on sales of patent rights, but on the other hand, it may facilitate sales by inducing confidence on the part of purchasers, that they will be protected in case of fraud or other defense. We refer for a fuller discussion on the general question, to the cases cited. The admission of the Pennsylvania statute in evidence, if erroneous, was harmless. The right of the defendant to interpose his defense against the plaintiff, the indorsee of the note, although he was a purchaser for value, provided he had notice of the consideration, was secured to him by the lex loci, and the plaintiff took the paper subject to all the infirmities which attached to it by the law of the place where the contract was made and was to be performed (Sta. Prom. Hotes, § 168, et seq.; 2 Kent’s Com., 459). There is no other question which requires special notice.

The judgment should be affirmed.

All concur.

Statutes and regulations cited

Constitution of the United States of America
- Art. I, § 8 p. 819