Marston v. Swett — 11 N.Y. Sup. Ct. 153

Majority

p. 153

WILLIAM E. MARSTON, Appellant, v. GEORGE W. SWETT AND OTHERS, RESPONDENTS.

Headnote

Letters patent—invalidity of—effect of, on agreement made Try assignees—Defeats in pleading.

An agreement was entered into between the plaintiff and defendants, the plaintiff and defendants being assignees of a patent for the manufacture of stoves, by which the plaintiff agreed that the defendants should have the exclusive right to manufacture thereunder, upon payment to him of a certain sum for each stove. Subsequently a suit was brought, in the United States court, by the defendants, against the plaintiff and others, in which it was decided that the letters patent were void. This action was brought to recover the sum agreed to be paid by the defendants. Held, (1), that the joint interest of the parties, plaintiff and defendants, did not prevent the defendants from showing the invalidity of the letters patent; (2), that the decree in the former suit was conclusive as to the invalidity of the letters patent, and as to the right of the defendants to set up such invalidity as against the plaintiff; (S), that the patent being void, there was no consideration for the agreement to pay royalties to the plaintiff. Cutler v. Bower (11 Q. B., 973) distinguished.

Defects in pleading must be urged in the court below where amendments may be permitted.

Appeal from a judgment in favor of the defendants, entered on a nonsuit, from an order directing judgment for defendants upon their counter-claim, and from an order denying a motion for a new trial.

This action was brought to recover certain “ royalties ” or license fees for the privilege of making and selling stoves under certain letters patent, of which the plaintiff was one-half owner at the time of making the contract to pay such royalties. The defense was, that the contract to license was void because not in writing, and that the patentee and assignor of the plaintiff, one Elizabeth Hawks, was not the first and original inventor of the patented device, but that the same was invented by one John H. Goodfellow, to whom, after a litigation, the priority had been awarded by the patent office. The answer also set forth a counter-claim for $1,208.49, for which the defendants claimed judgment.

p. 154

James Lansing, for the appellant.

The contract alleged in the complaint is not within the statute of frauds. The contract was not one “ that by its terms was not to be performed within a year from the making thereof.” (2 R. S., 135, § 2, sub. 1; Van Woert v. Albany and Susquehanna R. R. Co., 1 N. Y. S. C., 256.) The agreement was executed. (Talmadge v. Rensselaer and Saratoga R. R., 13 Barb., 493 ; Dodge v. Crandell, 30 N. Y., 294 ; McGlucky v. Butler, 1 E. D. Smith, 618.) If a writing were necessary, it is not necessary that the pleading should allege that fact affirmatively. (Livingston v. Smith, 14 How., 492 .) Where the agreement is admitted by failure to deny, no evidence to prove its existence is necessary. (West v. American Exchange Bank, 44 Barb., 178 .) The judgment or decree of the United States Circuit Court, read in evidence in this case, if available as a defense, is new matter avoiding the plaintiff’s demand, and must be alleged as well as proven. ( O’Toole v. Garvin, 1 Hun, 92 ; McCormick v. Pickering, 4 Comst., 376 ; Code, § 149; Brazill v. Isham, 12 N. Y., 9 ; 2 Whit. Pr., 112.) But if the pleadings permitted the introduction of said decree, it is immaterial as evidence in the case. The parties being tenants in common of the patent, and the defendants, by virtue of the contract, being entitled to the exclusive use of said patent, the relation of lessor and lessee will arise. (Mumford v. Brown, 1 Wend., 52 ; Cowper v. Fletcher, 118 E. C. L., 462.) The relation of lessor and lessee of a patent right, is analogous to the relation of landlord and tenant. (Bowman v. Taylor, 2 Alderson & Ellis, 278; Cutter v. Brown, 11 Q. B., 140; Laws v. Purser, 38 Eng. L. and E., 48.) The defendants, having used and enjoyed the invention, are estopped from denying the title of the lessor during that time. (Same cases; also, Bartlett v. Holbrook, 1 Gray, 114 ; Prevot v. Lawrence, 51 N. Y., 219 .) So long as the lessee is not disturbed he is' bound to pay, even though the lessor’s title be defective, or he be even without title. (Herman’s Law Estop., 368; George v. Putney, 4 Cush., 354 ; Prevot v. Lawrence, 51 N. Y., 219 .) Even an eviction is no defense as to accrued rent. (Giles v. Comstock, 4 N. Y., 270 ; McKewen v. Whitney, 3 Denio, 452 .) When there is a common source of title, one of the tenants in common cannot, as against a joint owner, show that the common title is. defective. (Clark v. Crego,

p. 155

47 Barb., 600 ; Jackson v. Streeter, 5 Cow., 529 ; Murphy v. Barnett, 2 Murph., 25 .) A lessor cannot avoid liability for rent by purchasing a paramount outstanding title. (Herman’s Law Estop., § 360; Sharpe v. Kelly, 5 Denio, 431 .) Neither can one tenant in common buy in an adverse title, so as to defeat the right of his co-tenant, but such purchase will inure to the benefit of his co-tenant. (Phelan v. Kelly, 25 Wend., 389 ; Herman’s Law Estop., pp. 377, 558, 559.)

Esek Cowen, for the respondents.

The contract set forth in the complaint not being in writing, it was void within the clause of the statute of frauds, which avoids contracts not to he performed within one year. (Doyle v. Dixon, 97 Mass., 208 .) Neither part performance nor complete execution on one side, will take the case out of the statute. (Lockwood v. Barnes, 3 Hill, 128 ; Bartlett v. Wheeler, 44 Barb., 162 .) Under section 11 of the patent act of 1836, which was in force at the time of the contract, every assignment of the exclusive right to make and use the thing patented, must be in writing in order to have any validity. (Gibson v. Cook, 2 Blatchf., 148 .) The judgment, being conclusive between these parties, was evidence that the patent under which the pretended license was given never had any validity, and that there was no consideration for the promise of the defendants to pay royalties. (Cross v. Huntly, 13 Wend., 385 ; Head v. Stevens, 19 id., 411 ; McDougall v. Fogg, 2 Bosw., 387 ; Saxton v. Dodge, 57 Barb., 84 , 114; Clum v. Brewer, 2 Curtis, 524.)

This case is like that of Hawks against the same defendants, argued at this term, in many respects. The additional facts which are important are, that Marston, the plaintiff, and Swett and others, the defendants, were the assignees of the alleged patent right of Elizabeth Hawks, by virtue of the assignment made by her in 1867, and of the second assignment made by her in 1870, after the surrender and re-issue. Being such owners in common, the defendants agreed with Marston that they should have the exclusive right, and that he should not license others.

In consideration of this, they agreed to pay him fifty cents for

p. 156

each stove manufactured, containing said invention. It appears that this agreement was not in writing, and the answer (the admissions in which are the only proof of the agreement) qualifies the admission by the averment that the condition of the verbal agree ment was, that the plaintiff should execute a written agreement to the same effect, which he has refused to do.

It is not denied that the defendants have made stoves, to a certain number, which would be under the patent, if the patent were valid. The same questions as to the effect of the invalidity of the patent are raised, which were in the other case.

A question was made, whether this verbal contract was valid under the statute of frauds; and a similar question, whether it was valid under the patent laws; the contract being, as was claimed, in effect, an assignment of the patent, and not being in writing.

But without passing, upon these, I come to the important point,' which is, whether the plaintiff can recover these fees, when the letters patent have been declared void.

Most of what was said in the former opinion is applicable here. Marston was a defendant in the suit brought in the United States court by these defendants, in which the letters patent were declared to be void, and Mrs. Hawks was adjudged not to be the inventor. He had an opportunity there to contest the question of invalidity, and to urge that, as to himself, these defendants were estopped. He might have claimed (with what success it is unnecessary to say), that the decree should be so qualified as to preserve any rights between him and these defendants, arising out of their contract. But that was not done, and the decree must be conclusive.

The plaintiff in this action made some offers tending to show collusion by the defendants with Gloodfellow. But so far as these offers were of any weight, they were only an indirect attack on the decree in the United States court. If that alleged collusion was a good defense, it could have been shown in that suit.

It is urged by the plaintiff’s counsel that the ownership in common of the alleged patent right, prevents the defendants from averring its invalidity as a defense.

And the case of Kinsman v. Parkhurst,^[4] is relied upon. In that case a patentee and an assignee of a part interest entered into

p. 157

the joint business of manufacturing the patented machines. The business was to be carried on by the parties on joint account, and a division of the profits was to be made according to a certain ratio. After the business had been carried on for a time, a bill was filed for an accounting. The defense was, the invalidity' of the patent. The court held this no defense. The defendant had “ made and sold' the machines under the complainant’s title, and for his aecomvtP “ The invalidity of the patent does not render the sales of the machines illegal.” “ Where money has been received, either by an agent or a joint owner, by force of a contract which was illegal, the agent or joint owner cannot protect himself from accounting for what was so received.” That does not apply ' to this case. If Marston had been in partnership with the defendants in the manufacture of these stoves, he might have been entitled to his share in the profits as should have been agreed. But there was no joint ownership of the business. The defendants were only his licensees under a patent which proves to have been void. And this case falls under that of Saxton v. Dodge^[4] and others like it in this State. Kinsman v. Parkhurst was not an action for license fees, or for purchase of a patent right. It was for the accounting and settlement of a joint venture. And the only important question was, how much was made by the venture, and not whether it was made with or without a valid patent right. Another case relied on by the plaintiff is that of Cutler v. Bower.^[5] It is worth while to examine this case briefly, as it is supposed to be important in both of these actions. The facts are these: In July, 1842, the plaintiff, Cutler, had granted the defendant, Bower, the sole license to make certain patented machines, on payment of a royalty. In October, 1842, the plaintiff, in consideration of a certain sum, sold one-half of the patent to the defendant, the defendant to" have the benefit of one-half of the royalty reserved by the previous agreement. The plaintiff sued for this sum, the consideration of the sale. There was a plea, replication and demurrer. The court held: First, that the consideration did not fail by reason of the alleged invalidity of the patent; for the defendant, at all events, was bound, by the agreement of July, to pay the royalty, whether the patent was valid or not, ás he would be estopped, in an action on that

p. 158

deed, from denying the validity. Second, that the proposed defense would be available only if the covenants (referring to the covenant of warranty in the deed of October) were dependent; that in fact they were independent, and each party might sue for a breach of the respective covenants. How, the second reason would not be good here, where a counter-claim can be made on a cause of action arising upon the same instrument.^[4] And the first reason is directly overruled in the case of Saxton v. Dodge, and in the similar cases mentioned in the opinion in the other action.' On a question which seems to be settled in this State, it is not necessary to refer to the decisions of other States sustaining the same view. Such, too, seems to be the doctrine of a late case in England,^[5] in which Lord Oottoítham says: “From the time of the last payment, if the manufacturer can successfully resist the patent right of the party claiming the rent, he may do so in an action for the rent for the usé of the patent for that year. The mere taking the license does not estop the licensee from denying the validity of the patent.” And certainly, when it has been decided, that, in an action for the consideration of a sale of a patent right, the invalidity of the right may be shown, fit necessarily follows that the same rule must apply in an action for royalties, so called, or license fees. The contrary decision in Cutler v. Bower may very possibly have been controlled by the conclusive effect then given to a sealed instrument. I think, therefore, that the court correctly held that the plaintiff had no claim against the defendants.

The only remaining question is ón the verdict directed for the. defendants on their counter-claim. The answer sets up that the plaintiff was indebted to the defendants for goods, wares and merchandise, sold and deliveréd, etc., since a certain date, in a certain sum, and asked judgment. The reply denied that the plaintiff was indebted to the defendants' for goods, wares and merchandise sold and ' delivered, etc., since that. date, in that sum, but admitted that there was a small sum due to the défendants, for goods, wares and merchandise, sold and delivered, etc., the amount of which the plaintiff does not know. It was claimed by the defendants that this was no denial. In strictness, this seems to be correct. To deny that one is indebted

* Code, § 150, sub. 1.

† † Nelson v. Fothergill, 1 Webster Patent Cases, 290.

p. 159

in the sum of $100, without more, is not a denial that one is indebted in the sum of ninety-nine. And a denial of indebtedness, followed by an admission that there is “ a small sum due ” for the same cause, leaves it very uncertain what the party considers to be a small sum; especially when he avers that he does not know its amount. But in any such case, if the party were surprised or misled, the court would permit an amendment, or grant some relief on the trial. Upon looking at the case however, although something was said about the condition of the pleadings in respect to the counterclaim, it would seem that the plaintiff did not urge this point, or show that he was misled.

The important matter evidently was the plaintiff’s claim, and this counter-claim was secondary. On the whole, therefore,' there is no reason to disturb the course which the case took on the trial.

The judgment and order appealed from should be affirmed.

Present — Learned, P. J., Boardman and Potter, JJ.

Judgment affirmed.

Footnotes

* 18 How. (U. S.), 289.
* 57 Barb., 84 .
† † 11 Q. B., 973.