Chadeloid Chemical Co. v. Johnson, 203 F. 993

203 F. 993 | 7th Cir. | 1913

BAKER, Circuit Judge

(after stating the facts as above). Since, on a hearing on bill and. answer, only those averments of the bill are to be deemed proven that are not destroyed by taking the answer as true, appellees never trespassed upon appellant’s reservation of price control.

j t ] For appellee’s invasion of appellant’s manufacturing control in 1909, by omitting to put notices of the patent and of the price restriction upon the containers, an action at law for damages would lie; but. injunctive relief being aimed at the prevention of continuing or threatened trespasses, and appellees having ceased to trespass and having no intention and making no threats to resume, as appellant knew before suing, a bill in equity would not be justified. Kenicott Co. v. Bain, 185 Fed. 520, 107 C. C. A. 626.

[2] So the only question is whether a bill for injunction to prevent infringement of a patent can be founded on the defendant’s violation of covenants, in a license agreement, to pay royalties, to make reports, and to submit his books to the complainant’s accountant.

There should be no difficulty in perceiving the difference between the subject-matter of a grant and the consideration which the grantee pays or promises in money or acts. FI ere the subject-matter of the license is described by first bounding the whole territory of the patent monopoly and then excepting the portions thereof which appellant reserved. No reservation respecting use was made. One reservation concerns the method of manufacture — putting on the notices. Another has to do with the terms of sale — the price restriction. None other is found.

The confusion that inheres in appellant’s bill and in its argument on the sufficiency thereof may be resolved by considering the remedies appellant would have for violations of either or both of the aforesaid restrictions. One remedy would be under contract law. A suit could be based on appellees’ covenants to obey the making and selling restrictions. The other would be under patent law. A straight, unadorned bill for infringement could be filed, and appellees put to bringing forward the license as a defense, whereupon the question would be: Was appellees’ entry upon a granted or upon a reserved portion of the patent monopoly? Or appellant, in its bill, could anticipate the defense of license, and thereupon the question would be the same. As was pointed out long ago in Victor Co. v. The Fair, 123 Fed. 424, 61 C. C. A. 58:

“Whether or not appellee covenanted to be bound (by the price restrictions) * * * is immaterial in this case, for the suit is not upon a promise, to keep out of the reserved portion of the monopoly, but is for the trespass in entering without permission.” ¹

So, in this infringement suit, if appellant could not base its cause of action upon appellees’ covenants to keep out of the reservations respecting manufacture and sale, much less could it charge infringement by reason of appellee’s violation of covenants which have nothing to do with determining the.question of trespass upon the domain of the patentee. Appellant, in seeking charges of infringement of the patent, has been looking at the wrong end of the license contract. Instead of scrutinizing the subject-matter of the grant — the metes and bounds of the license to manufacture, use and sell embodiments of the invention — appellant has had its eye fixed upon the considerations on account of which the license was granted. This is of no avail in an infringement suit.

Appellant advances a theory that, because the considerations are stated, “in consideration of the covenants hereinafter contained and upon condition that the licensee keep this agreement,” the keeping of the covenants to pay royalties, make reports, and open the books to an accountant, is a condition precedent to the continued existence of the license. If the license came into existence, and appellant concedes it did, it continues in existence until a forfeiture is effected. Comptograph Co. v. Burroughs Adding Mach. Co. (C. C.) 175 Fed. 787, and cases cited. The agreement gives appellant the right to enforce a forfeiture for breaches, but contains no provision that breaches shall be self-operative as forfeitures — even if such a provision could have any legal effect to that end. But, more important, if the covenants to pay royalties, make reports, and open the books, are matters of contract law, no words of the parties can make them matters of patent law. Nor can .covenants that in their nature are conditions subsequent be transmuted into conditions precedent by agreement of parties.

The decree is affirmed.

1 See, also, Henry v. Dick Co., 224 U. S. 1, 32 Sup. Ct. 364, 56 L. Ed. 645; Hartell v. Tilghman, 99 U. S. 547, 25 L. Ed. 357; Consolidated Middlings Purifier v. Wolf (C. C.) 28 Fed. 814; Washburn Mfg. Co. v. Cincinnati Barb Wire Co. (C. C.) 42 Fed. 675; Perry v. Noyes (C. C.) 96 Fed. 233; Allen v. Consolidated Fruit Jar Co. (C. C.) 145 Fed. 948.