Paper-Bag Machine Co. v. Nixon

delivered’ the opinion of the court.

On the 28th of .April, 1857, a patent was granted to Charles H. Morgan and .Benjamin R. Smith for an invention by Benjamin F. Rice of a “machine for making paper bags.”' This will hereafter be referred to as the Rice patent. By agreements entered into on the lltli of February and 12th of August, 1859, the owners of this patent executed to Martin Nixon, Thomas Nixon,, and William II. Chatfield, partners, under the name of Nixon & Chatfield, a. license for the exclusive use of the patented machines within certain territory, which included the States of Ohio and Indiana. Thomas Nixon, one of the licensees, is one of the parties 'to these appeals, and upon the dissolution of the firm of Nixon & Chatfield, in the year 1865, his interest in the license passed to and became vested in Chatfield & Woods. 'On the 6th of March, 1860, a reissue of this patent was granted to Charles. H. Morgan, Leonard' Whitney, Jr., and Thurston Priest. Some time about tlie year 1863, Francis II.

On the 17th' of March, 1868, another , patent was issued to Charles H. Morgan for an improvement in paper-bag machines. This will hereafter be referred to as the Morgan patent. After-wards, Francis H. Morgan became the owner of two machines containing the improvements embraced in this patent, with an unrestricted license for their use. On'the 26th of October, 1865, an exclusive license for the use in Philadelphia of machines embraced in both patents was grafted to Francis H. Morgan, but there is no testimony showing that his rights-in respect to the machines he already owned were "confined to that territory,-and there is no doubt but that he owned all the machines now in question long before this exclusive license was ■given.

On .the 27th of November, 1865, which was after Thomas Nixon had retired from the firm of Nixon & Chatfield, and transferred all his interest in the exclusive license for the Rice patent to the other partners, Francis H. Morgan sold and conveyed to Thomas Nixon the. two Morgan machines which he owned, and agreed to furnish on demand .all other machines of like pattern and workmanship which Nixon might.want. Nixon on his part bound himself not to use the machines he got ■ in this way except within the States of Ohio and Indiana, and to pay the owner of the patent a royalty of three cents on every thousand bags made. He also .agreed not to use any other machines in the manufacture of bags than such as he procured under .this contract.

Afterwards, on the second day of November, 1866, Nixon wanted another machine, and called on Francis H. Morgan to

All these things were done by Francis H. Morgan with the full knowledge and consent of Charles H. Morgan, who was then the sole owner of his own patent and of a half-interest in that of Rice. An attempt was’made to show the contrary of this, but the testimony leaves no doubt in our minds as to the fact.

Nixon took to Richmond, Indiana., all the machines he got from Francis H. Morgan, and either himself or through others carried on the manufacture of bags by their use. On the 21st of April, 1871, the Rice patent was extended for .seven years, from April 28, 1871, on the application of Roxana Rice, the widow and executrix of the inventor. Mrs. Rice assigned the extended patent to the Union Pa.per-Bag Machine Company, and that company, on the 27th of June, 1871, granted to Chátfield & Woods the exclusive right to. use in the States of Ohio and Indiana machines constructed under the patent. At the sanie time the company granted to the same parties the exclusive right of using within the same territory other machines covered ;,by other patents which it owned, reserving a royalty of four cents on every thousand bags manufactured by any of the machines.

On the 17th of July, 1871, after this assignment, the Bag Company and Chatfield & Woods sued Thomas Nixon, Morris H. Nixon, and William Andérson, alleged to be doing business as partners under the name of Nixon & Company, to restrain them from using the Rice machine. The defendants answered, denying the alleged partnership, and averring that the business was carried on by Morris Hi Nixon and William Anderson alone, they using the machine which belonged to Thomas Nixon and paying him a stipulated rent therefor. The "suit was then 'discontinued as to Thomas Nixon, and from that time it was prosecuted alone against the other defendants. A new suit of

The accounting was continued before the master- until the 14th-of Jtine, 1876, when Thomas Nixon paid to the Bag Company the sum of $7,543, and took a receipt therefor, as follows: —

“Cincinnati, Juno 14,1876.

“Received of Thorrtas Nixon the sum of seven thousand five hundred and forty-three dollars (7,548.00) money due under the contract of F. H. Morgan with Thomas Nixon, dated November 27th, -Í865, and in full for the amount which the said Thomas Nixon reported to be due as royalties under said contract, May 10, 1876.

“ $7,543.00. Union Paper-Bag Machine Co,

“By Edwin-J. IIowlett, Pres."

The hearing before the master was continued after this payment was made, and on the 23d of October, 1877, a report was filed, in which the master-stated that the period covered by his inquiries was from June 27, 1871, the date of the exclusive license to Chatfield & Woods, to June 9, 1875, the date of the service of the injunction in the case. He also set forth the facts as to the contracts with Francis H. Morgan, and the payment of the royalties thereunder, substantially as they have already been given. ' He found that the number of bags manufactured by Nixon & Company, between the dates above mentioned was 9J,500;'&00, and that the royalty fixed by .tfie Bag Company for the use of all its machines was four gents'a thousand.

After the report was filed, the defendants- m each of the cases asked and obtained leave to put in a supplemental answer, setting up the contract with Francis H. 1Morgan, and the payment to and acceptance by the Bag Oompany of the royalties due thereunder on the 14th of June* 1876. Upon the final hearing, after these answers were in,’ the court proceeded on the evidence to state the accounts, 'and decreed that Chatfield &r Woods had no right on the pleadings and evidence to any

In the suit against Thomas Nixon the same general conclusions were reached as in that against Morris Nixon and Anderson, but a decree for one cent damages only was rendered against him, because he only rented-his maohines to others to be used, and did not use them himself. From this decree, also, both parties appealed.

Upon the foregoing facts, the first question that- presents itself is whether the use of the Rice machine was included in the royalty fixed by the contract of Francis H. Morgan with Tilomas Nixon. If it was, then clearly, so far as the Bag Company is concerned, the acceptance of the stipulated royalty was a satisfaction of all claims for damages. This was substantially conceded on the argument.

The right of the owner of a patented machine, without any. conditions attached to his ownership, to continue the use of his machine during an extended term of the patent, is well settled. Bloomer v. McQuewan, 14 How. 589 ; Chaffee v. Boston

Next, as to Chatfield & Woods. Their exclusive right to the use of the Rice machine continued no longer than the term of the original patent. Wilson v. Rousseau, 4 How. 646 . The Bag Company, does not appear ever to have had any interest in the patent before the extension. Chatfield & Woods have never been' anything else than licensees. As such they could not sue for an infringement. All their rights must be enforced through or in the name of the patentee. Littlefield v. Perry, 21 Wall. 205 . Their recovery in this case, therefore, must be limited to their rights under'the license- from the Bag Company. Such was the understanding of the master, for he distinctly states in his report that his inquiries were confined to the period between the date of this license and the service, of the injunction which stopped all further use of the machines.

Whatever may have been the effect of the first exclusive-license held by.Chatfield & Woods upon the right of Nixon to use his Rice machine in Indiana before the end of the original term of the patent, as that license ceased when the term

From What has thus been said it appears that the decree in the suit against Nixon & Anderson, as far as it requires the payment of damages, was wrong. As the payment of the royalty was not made until long after the interlocutory decree sustaining the validity of the patent, and the supplementary answer setting .up the special defence was -not filed until after the report of the master was in, it was right to charge the costs against them.

So. far as the appeal of Thomas Nixon is concerned, the controversy is really-as to costs alone. The decree against him-will consequently hot be considered. Canter v. American & Ocean Insurance Companies, 3 Pet. 307 ; Elastic Fabrics Co. v. Smith, 100 U. S. 110 .

The decree in thé case against Nixon & Anderson will be reversed, with costs, and the cause remanded with instructions to enter a decree against the defendants for one dollar only and costs of suit. That in the suit against Thomas Nixon alone will be affirmed; each party to pay the costs of his own appealand it is -

So ordered.

Me. Justice Matthews, Mr. Justice Geat, and Mr. Justice Blatcheobd did not'sit in these cases, nor take any part in deciding them.