Denise v. Swett

The defendant was formerly a member of the firm of Sampson &■ Swett, a copartnership engaged in a manufacturing business. This. copartnership was dissolved in the month of January, 1890, and the: defendant .assumed all obligations of the firm then outstanding, and agreed to indemnify Sampson from any loss, damages or costs growing out of their joint business.

On the 3d day of July, 1882, an agreement was made between, one Henry H. Brown, of the first part, and Sampson & Swett, of' the second part, by which Brown, who was the owner of an invention known as an improvement in barrel headers, for which, and also for ‘an improved screw barrel press, letters patent had been, issued, agreed to license for the term of one year from the 1st day of July, 1882, Sampson & Swett to manufacture and sell, exclusively, such improvements within the entire territory covered by the-letters. Brown further agreed, upon receiving a notice of at least,

Under this agreement, the defendant and his copartner began to manufacture and sell the machines, and continued to manufacture and sell the same up to the time of the dissolution of the defendants’ firm, and after such dissolution this defendant continued alone to manufacture and sell the same up to the beginning of this action, which was on November 16, 1891. The defense interposed consisted of a denial of liability for the manufacture and sale of such machines after the month of June, 1886, when,, as it is claimed, the above contract was terminated. The further defense is, that the machines manufactured by the firm and by the defendant after the last-named date differed materially from the machines manufactured and sold under Brown’s patents.

The referee, in accordance with a clear preponderance of the evidence, has found in his report that there was no substantial difference in such machines. It is further abundantly established by the evidence that after the month of June, 1886, and up to November, 1891, there were manufactured and sold by Sampson & Swett and by the defendant Swett, in all, 529 dozen upon which no royalties or license fees had been paid, for which, at the rate of three dollars and fifty cents per dozen, this plaintiff, as assignee of Brown, brings this action, and judgment in the sum of $1,851.50 was accordingly directed in behalf of the plaintiff.

It is contended by the learned counsel for the appellant that the agreement of 1882 was not continued after June 30, 1886, and was

It is true that the agreement between the parties was not in terms extended by Brown beyond June 30, 1886. From that date to the beginning of this action, the defendant denied all liability to Brown, and his counsel now urges that inasmuch as the contract had not in words been extended, there can be no recovery, but that the plaintiff’s remedy, if any, is hy an action for the infringement of his patents, and that such action is solely cognizable by the Federal courts. But the recovery, we think, may in this case be sustained upon the ground of an implied contract which was manifested by the conduct of the defendant and his copartner. Having once settled upon the existence and terms of the contract in words, there would necessarily arise an implied promise on the part of the defendants to pay for the use of such patented inventions under this agreement the sum therein provided for. And, notwithstanding the fact that the plaintiff’s assignor, Brown, affirmatively objected to such further manufacture and refused to continue the contract under the old terms, it does not, as it seems to us, preclude a recovery, for the reason that the defendant ought not to be heard to deny the existence of a contract without which he would not originally have begun the manufacture and sale of barrel headers. Having once entered into contractual relations with the owner of the patent of the character above mentioned, it cannot be permitted to the licensee to repudiate liability measured by the terms and conditions of the contract.

The learned referee, James O. Smith, has written the following opinion, which we adopt, fully covering other branches of the case: “ The agreement, which was made in July, 1882, for the term of one year, contained a provision that it might he extended for any length of time which the defendant’s firm might desire, within the life of the patents therein mentioned. By mutual consent, it was extended from year to year, until July, 1886. Negotiations for a further extension were had about that time, hut they proved fruitless, and Brown gave notice that negotiations for an extension were ended. Thereupon a settlement was had, and the firm paid royalties, at the rate stipulated in the agreement, on all the barrel headers and presses

“ The evidence on that point supports the plaintiff’s contention. A specimen of each class of machines was produced at the trial, and testimony was given as to their differences. The only difference appears to be in the mode of fastening the follower to the screw. The defendant testified that the machines made by him prior to July, 1886, had £ a pin through the screw under the washer; the pressure of the screw came on top of the washer.’ Those made since £ have a groove turned in the lower end of the screw, and is held in place by a washer made in two parts, the washer fitting into the groove in the screw; the pressure of the screw bears upon a separate casting placed on the inside of the follower and under the washer.’ The substance of the testimony is understood to be that the fastening in the earlier machines was by means of a pin through the end of the screw ; in the later ones, it was by means of a groove at the end of the screw, and a washer fitting into the groove. ’So far as can be gathered from the testimony, each arrangement seems to serve the purpose (and that only) described in the specifications annexed to the patent, of £ fastening the follower to the end of the screw, but swivelling it in place, so that it can turn freely in either direction.’ £ Swivel ’ is defined by Ainsworth, in his dictionary, as £ something used in or on another body, so as to turn round in or upon it.’ The definition applies to either arrangement.

££ It does not appear that either method differs from the other in practical operation or utility, or even hi durability or cost. The two seem to be ‘ identical in function, and substantially identical in performing that function,’ and so are ‘ equivalents.’ Walker on Patents (2d ed.), § 362.

“ It must be held, therefore, that the machines made during the two periods were substantially alike. That being the case, I think the defendant and his firm, in continuing to make and sell the

“ The case of the Union Manufacturing Co. v. Lounsbury ( 41 N. Y. 363 ) seems to he an authority for that position. The learned counsel for the defendant suggests that that case is distinguishable from this, by reason of the fact that there the notice forbidding the further use of rights under the agreement was given during the lifetime of the agreement, while here the notice that negotiations, for an extension were ended was not given until the agreement had expired. It is true that the term covered by the extension of the agreement in question expired with the month of June, 1886, and the notice referred to was given at about that time, as has been remarked, but the agreement, by its terms, -was to be extended for any length of time during the life of the patents that the defendant’s firm might desire, the firm giving notice of such desire. Nothing-was done by Brown towards rescinding the agreement or prohibiting the use of the rights conferred by it, beyond giving the notice, already mentioned. It was competent for the parties to continue the agreement, notwithstanding that notice, and to waive the formalities prescribed by the agreement. The desire of the defendant and his firm to extend the agreement was manifested by then continuing to use the right, which it gave them, of manufacturing aud selling the machines, and the plaintiff’s acquiescence in such use was; shown by his taking no measures to prevent it and by his suing for the royalties provided for by the agreement. There does not. appear to he any substantial difference between this ease and that of the Manufacturing Co. v. Lounsbury, so far as the point under consideration is concerned.

“ The cases cited hy the defendant’s counsel, which hold that a State court has not jurisdiction to try the question of an infringement of a patent for an invention, have no application to the case in hand. There -is no question of an infringment here. The action is on the contract. The only allusion to an infringement in the pleadings is

“ In the circumstances of the case, the only question raised by the portion of the answer referred to, is one of comparison between the machines made at the different periods above mentioned, and that comparison is material, not for the purpose of determining whether the defendant has infringed the plaintiff’s patent, but for the sole purpose of determining whether, since June, 1886, the defendant, or his firm, has made and sold machines answering to the description contained in the contract, and if so, how many.

“ If that question takes the case out of the jurisdiction of the 'court, it follows that the defendant, in every action brought in a State court to recover royalties or other comjiensation agreed to be paid for the use of a patent right, may oust the court of jurisdiction by interposing a defense like the one in question, and if he is then ■sued by the plaintiff in a Federal court for the same cause, he may procure there a dismissal of the complaint for want of jurisdiction in that court, by omitting to set up such defense in his answer.

“ In Hyatt v. Ingalls ( 124 N. Y. 93 ) it was contended that a i-eissue of a patent, under which the plaintiff claimed, was void for the reason that it embraced claims not included in a former reissue, :and omitted claims which were in the latter, and it was also con-fended that the issue thus made was not within the jurisdiction of the State court (p. 102), but the contention did not prevail, the court holding that it was matter of comparative construction of the two reissues, and although the last reissue was broader than the first, it embraced the claims represented by the former reissue substantially, •and with a sufficient distinctness to preserve them within the prin■ciple that the reissue of letters patent, embracing more than did ■■those surrendered, will be deemed invalid as to the excess, or new

“ The defendant’s counsel argues that the principle of the Brown patent had been in public use before his patent was issued, and, therefore, the patent is worthless. The defendant, or his firm, in whose place he now stands, having entered into the contract with Brown, and having taken from, him a license to make and sell the subject of the patent, cannot, for the purpose of a defense to an action to recover the royalties, question the validity of the patent. (Marston v. Swett, 66 N. Y. 206 ; S. C. on 2d appeal, 82 id. 527; Hyatt v. Dale Tile Manfg. Co., 106 id. 651.)

“ The defendant, having assumed the liabilities of his firm, on its dissolution, is liable for royalties on the machines made by the firm, as w;ell as on those made by himself, since June, 1886.

“ The assignment made by Dunning, as the general assignee of Brown to the plaintiff, carried the claim sought to be recovered herein.

“ If the views above expressed are correct, the plaintiff is entitled to recover.

“ There is evidence tending to show that the defendant and his firm have made and sold 6,347 machines since June, 1886, upon which no royalty has been paid. The royalty upon them, at the rate fixed by the contract — three dollars fifty cents per dozen — amounts to $1,851.50. It appears that forty-eight machines, sold in July, 1886, were manufactured previously, and the royalties on them were paid.

“ The plaintiff’s counsel claims interest on the amount due, but interest is not demanded in the complaint, and as it appears that no demand was made for payment or for a report of sales until about the time of the commencement of the suit, I think no interest should be allowed.”

It follows that the judgment appealed from should be afiirmed, with costs.

Dwight, P. J., Lewis and Haight, JJ., concurred.

Judgment appealed from affirmed, with costs.