Marsh v. Dodge — 11 N.Y. Sup. Ct. 278

Majority

p. 278

JAMES S. MARSH, Respondent, v. JOHN A. DODGE and others, Appellants.

Headnote

Patent — licensee of— when cannot set up invalidity of patent.

The defendants agreed to pay to the plaintiff, the owner of a patent for the manufacture of raltes, ten dollars for each rake that should be made or sold, or disposed of by them, or by their authority or procurement; subsequently they sold to an incorporated company all their partnership effects, including all the rakes remaining unsold, and a number then in process of manufacture. Held, that the defendants were chargeable with the royalty upon each of the unfinished rakes so transferred.

A licensee must notify the owner of the patent of his renunciation of the license, before he can repudiate his obligations under it.

Upon the trial defendants objected to the admission in evidence of the patent, on the ground that it was not properly authenticated. Held, that proof of the patent was unnecessary, as the defendants were estopped from denying either its existence or validity.^[1]

Motion for a new trial on exceptions ordered to be heard in the first instance at the General Term, after judgment entered in favor of the plaintiff upon the verdict of a jury.

This case has already been before the General Term, and is reported in 5 Lansing, 541.

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The complaint alleged that before and during the years 1865 and 1866, the said plaintiff was the owner as patentee of certain letters patent of the United States, securing certain improvements in harvesting machines, commonly known as “ Marsh’s self-rake.” That on or about the 2d day of September, 1865, the said plaintiff, being such owner as aforesaid of said patented improvements in said letters patent specified and set forth, and the said defendants, by their said firm name of “ Dodge, Stevenson & Co.,” executed in duplicate, and by delivery interchanged the license, in and by which the said plaintiff licensed to the said defendants, as such copartners as aforesaid, the right and privilege within certain territories therein set forth, of making, using, and vending to others to be used, the improvements in said letters patent specified; in consideration whereof the said defendants, as such copartners, thereby agreed to pay to said plaintiff a royalty or patent fee of ten dollars for each and every Marsh’s self-rake that should be made and sold or disposed of by the said defendants, or by their authority or procurement, during the existence of said patents. That since the execution of said license, the said defendants have not rendered a true and faithful, or any, account of the said self-rakes made by them or by their authority or procurement, or paid the fees stipulated in said license.

The defendants, in their answer, alleged that on or about the 2d day of September, 1865, they intending to manufacture rakes of a certain construction, form and kind, to be attached to and sold with certain reaping machines which said defendants were then manufacturing, the said plaintiff, for the purpose and with intent of inducing the defendants to make and enter into the contract or license set forth in said complaint, and with the intent to cheat and defraud the defendants, falsely and fraudulently represented and stated to the defendants that he held and possessed certain letters patent which secured to him, the said plaintiff, the sole and exclusive right and title to manufacture, use and vend said rakes of the construction and kind defendants then proposed to make and vend, and that such patent rights therefor were in all respects good and valid patents; that his said patents embraced and included the entire, sole and exclusive right to make, use and vend all self-rakes to be, or which could be attached to any reaping machine: and

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that the said self-rake, with all the rights of the invention thereof, and the right to use or make or vend the same in the particular form, manner and material then proposed to be made and sold by defendants, were all embraced in his said patents, and belonged to him. That the defendants, relying upon said representations and statements, made and entered into the contract or license named in the said complaint, and accepted the same. And defendants alleged, that in truth and fact, the said plaintiff did not own or possess any letters patent which secured to him the sole or exclusive right or title to make, use or vend said self-rake, or any self-rake of the structure or kind the defendants then proposed to make, use and vend, and such patent rights therefor were not good, or valid, or genuine, nor were they the inventions of the plaintiff, nor did his patent right embrace or include the entire, or sole, or exclusive right to make, use or vend any or all self-rakes to be, or which could be attached to any reaping machine.

Rollin Tracey, for the plaintiff.

H. V. Howland, for the defendants.

This action was brought to recover a royalty accruing upon the manufacture and sale of patented rakes, under an agreement made by the defendants as copartners with the patentee, who is the plaintiff. The agreement is in writing, under the hands and seals of the plaintiff and defendants respectively. It contains a recital of the fact that the letters patent had been issued to the plaintiff j and an agreement on the part of the defendants to pay the plaintiff ten dollars upon each of the rakes that should be made or sold, or disposed of by them, or by their authority or procurement, during the period for which the license continued. The plaintiff’s claim was limited by the complaint to rakes manufactured prior to January 1, 1867. It appeared that the defendants had ceased to manufacture rakes after March 10, 1866, and had been succeeded in that business by an incorporated company, to which they had sold and transferred all their partnership effects, including all the rakes manufactured by them prior to that time, and remaining unsold,

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and including also a large number of rakes in process of manufacture. It appeared, also, that the defendants, before the transfer to the company, had sent some of the completed rakes to their agents in various parts of the country to be sold, and that purchasers from such agents had the privilege of returning the rakes bought, if they should not be suited by them.

Much of the time spent in the trial was devoted to the examination of witnesses upon the question, whether the rakes actually manufactured were in all respects such as were specified in the plaintiff’s patents. This inquiry ought to have been excluded, because the defense which that kind of evidence tended to establish had not been pleaded. It was, however, indulged by the court, without objection, and the questions arising upon it were fairly and correctly submitted to the jury. In the course of this inquiry, the defendants offered in evidence a patent granted to the defendant Dodge, bearing date August 20, 1867, for a rake similar to that invented by the plaintiff. It was excluded, and the defendant excepted. We think this exception, as well as those taken to the judge’s charge on the subject involved in this evidence, were unavailing for this reason, if for no other, namely, that the evidence was not material to the issue, and, in respect to the rejection of Mr. Dodge’s patent, the plaintiff’s claim did not embrace rakes that were manufactured after that patent was issued, so that, in any point of view, the evidence was irrelevant. Moreover, the defendants were estopped to deny that the rakes manufactured were made under the plaintiff’s license, so long as they retained the license itself. They were at liberty to relinquish it at any time, and they were bound to do so, if they intended to deprive the plaintiff of his royalty. Good faith requires that a licensee shall give to the owner of the patent notice of his renunciation of the license, so that the privilege may be sold to others, before he can be permitted to repudiate his obligations under it.

The agreement of the plaintiff to give a drawback of three dollars, was not admissible in evidence. It was not a part of the license, although it was made on the same day, but it referred to another and independent transaction. If the defendants wished to avail themselves of that agreement, they should have pleaded it,

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and have set up their counter-claim under it. Hot having done so, it was not available to them as a defense.^[3]

An exception was taken by the defendants to the admission of the plaintiff’s patents in evidence, on the ground that they were not properly authenticated. We are inclined to think this exception was not good, but we do not deem it worth while to discuss the subject, for the reason that proof of the patents was not necessary. We think the defendants were estopped to deny either the existence or the validity of the patents. They had under the license all that they bargained for. They cannot, therefore, be permitted to say that the rakes which they made or caused to be made, were not made under the license, because the plaintiff had not the patents recited in it, or because such patents were invalid, any more than a tenant can deny that he occupied under the lease which he took from his landlord,^[2] Many other exceptions were taken by the appellants to the admission and rejection of evidence. We have examined all of them, and found no error.

In submitting the case to the jury, the court restricted the liability of the defendants to the number of rakes actually manufactured by them in conformity with the improvement specified in the plaintiff’s patents, and which had been actually sold. But he treated the transfer of the defendants to the corporation as a sale of the completed rakes to them, and the sale by the corporation of the unfinished rakes, transferred to them by the defendants, and which the corporation afterward finished and sold on their own account, as a sale made by the authority or procurement of the defendants, within the terms of the license. We think that principle is correct. The sale to the corporation was something more than a mere transfer of the materials of which the rakes were composed. It gave to the rakes a quality of vendibility, which they would not otherwise have possessed in the hands of the corporation. Both the corporation and the defendants must have intended that the former should acquire the right to sell them, without becoming liable to the plaintiff for an infringement of his patents.

† † Lawes v. Purser, 8 El. & Bl., 930; Baird v. Neilson, 8 Cl. & Fin., 726; Noton v. Brooks, 7 H. & N., 499; Crossley v. Dixon, 10 H. L. Cas., 293; 1 Greenl. Ev., §§ 22-27.

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The defendants parted with all their title to them, and, therefore, could not sell them without a repurchase; and no liability would attach to the corporation, because they never agreed to pay a royalty. The consequence would be, that if the transfer to the corporation should not be regarded as a sale within the meaning of the license, the plaintiff would, by a species of legerdemain, be deprived of his royalty altogether. The same principle ought to govern the transfer of the unfinished rakes. The sale of them by the corporation would be protected by the license, because they were sold by the licensee in an unfinished state to the corporation, for the purpose of being finished and sent into the market and sold. Such a sale could not be treated otherwise than as one made by the authority and procurement of the defendants. They should therefore pay the royalty on them.

A case similar to this was recently decided by the Commission of Appeals in accordance with the views expressed,^[3] and we think a contrary principle would be incompatible with the rights and obligations of the parties.

An exception was taken to an expression in the judge’s charge, to the effect that rakes which the defendants had sent to their agents, constituted a sale, and the plaintiff was entitled to a royalty upon them. Taken by itself, disconnected from the rest of the charge, this would be erroneous. But when the whole charge is considered, the instructions on this subject were unexceptionable. The rakes in the hands of agents, passed in the sale to the corporation, and the jury were told very plainly, that the defendants had a right to sell them conditionally, and if any of them were returned to the defendants or to the corporation, by reason of their failure to conform to the condition on which they had been sold, the defendants were not liable for the royalty upon the rakes so returned. This was more favorable than the defendants had a right to ask, for the rakes, when returned, would form part of the effects of the defendants which were the subject of the sale made by them to the corporation, and consequently the plaintiff would be entitled to the royalty by virtue of that sale.

The criticism that the complaint does not embrace sales made by

* Wilder v. Stearns, 48 N. Y., 656 .

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the authority or procurement of the defendants, but only such as were made by them personally, is too critical.

Upon the whole case, therefore, we think the judgment should be affirmed.

Present — Mullin, P. J., Smith and Gilbert, JJ.

Judgment affirmed.

Footnotes

* Code, § 149, 150, and Wait’s notes.