95 F. 669 | U.S. Circuit Court for the District of Western Michigan | 1899
This is a suit in equity brought by the Edison Electric Light Company, a corporation organized under the laws of New York, and the Edison light Company of Grand Rapids, a corporation organized under the laws of Michigan, and doing business at the city of Grand Rapids, against the Lowell Water & Light Company, doing business at Yergennes, Mich., and the Peninsular light, Power & Heat Company, doing business at Grand Rapids, both of which last-named corporations are organized under the laws of Michigan. The first named of the complainants sues as the owner of patents Mos. 274,290 and 287,516, issued to Thomas A. Edison. The other complainant is licensee for the use of the inventions covered by those patents in the city of Grand Rapids. The first named of the defendants is engaged at Yergennes in the generation of electrical current, which it transmits to the limits of the city of Grand Rapids, and there sells to the other defendant, who sells and distributes it to the people of the city of
Counsel for complainants states the original facts in the following language:
“The complainant Edison Electric Light Company was organized in 1886, acquired the legal title to a large number of patents granted to Thomás A. Edison and others, and immediately entered upon the business of exploiting the inventions in the electric! art secured by those patents. The business scheme contemplated by that concern, and afterward carried into effect, was to provide for the establishment of local central-station plants, operated by local companies, which, under a license from the parent company to use its patented inventions, should install systems of lighting in the various municipalities throughout the country. In pursuance of (his scheme, Edison lighting companies were organized in almost every city of importance in the United States, each establishing a central station, equipped with electrical apparatus for the general ion of electric current. Among these local companies was the complainant. Edison Light Company of Grand Rapids (then known as the ‘Grand Rapids Edison Light & Fuel Gas Company’). This concern, organized under the Michigan law, erected in the city of Grand Rapids a central station equipped with engines, dynamos, etc., and forthwith entered upon the business of supplying electric current to the city of Grand Rapids for illuminating and other purposes, employing the arrangement of apparatus known as the ‘Edison three-wire system,’ covered by patent No. 27-1,200, in suit. The business scheme contemplated by the Grand Rapids Company was not to manufacture and install apparatus outside of its own central station, hut merely to generate current, and supply it to consumers, for use in apparatus installed by other persons or concerns. There were at this time, however, in the city of Grand Rapids, at least, no construction companies carrying on the business of running electric wires in buildings; and it therefore became necessary for the Grand Rapids Company, in its effort to Introduce lighting by electricity, to wire certain of the buildings in which this type of illumination was desired. Since, however, it was proposed by that concern to earn its profit, not from such wiring, but by the supply of current thereto, such wiring as it did was put in at a cost of labor and materials.”
This statement is substantially correct, so far as it goes, but I am satisfied that patent No. 287,516 was also concurrently employed.
Among the buildings into which the Grand Rapids Company introduced the patented apparatus was the Livingston Hotel. The company made a contract with the proprietors of the hotel in 1888 for supplying it with, electricity, whereby it should be lighted; and at the same time, while the building was in the course of erection, the Grand Rapids Company, under contract with the owners of the hotel, put in the apparatus, the most of it within the walls, behind 1he lath and plastering, and through partitions. The Livingston Hotel continued to be supplied with the current by the Grand Rapids Company, and used the apparatus so put up, until the fall of 1894, when the proprietors of the hotel ceased to use the current from the Fldison Light Company of Grand Rapids, and set up a dynamo of their own on the hotel premises, together with a steam
The substance of the complaint is that the Livingston Hotel people are using the system of the Edison patents for the purpose of lighting the hotel, notwithstanding the contract between the Grand Rapids Company and the owners of the Livingston Hotel has long since expired; it being claimed that the owners of the hotel had the privilege of using the patented apparatus only during such a period as it should continue to take its current from the Grand Rapids Company under contract with that company. On behalf of the owners of the Livingston Hotel, it is claimed by the defendants, or one of them, that the installation of the patented apparatus for a price paid therefor, while the hotel was being built, was, in substance and effect, a sale of the apparatus, which carried with it a release from the monopoly of the patent, and authorized its free use thereafter. The two defendants are charged with contributing to the infringement of the complainants’ patents by the Livingston Hotel people. The latter are not made defendants to the suit, and it seems an anomalous constitution of the case that the party principally interested in the subject of the controversy is entirely omitted from the parties set up for the litigation. The theory on which this making up of the parties is supported evidently is that all parties guilty of infringement are tort feasors, and the complainant may sue whom he will, all of which would be consistent with the principles which obtain in courts of law. But it certainly is not a convenient one to be pursued in equity courts, where the leading rule in respect of parties is to bring in those who are interested in the decree. Under the operation of that rule, the owners of the Livingston Hotel should have been made defendants in the suit, so that they could have the opportunity of defending their own rights, instead of being obliged to leave the contest to others. But without deciding whether this ought to have been done, there having been no question of this sort raised in the progress of the case, I shall proceed to determine, it without reference to that feature. It is obvious, however, that the defendants may justify under the right of the owners of the Livingston Hotel, if the latter have such
Another question, however, is involved in reference to the position of the Lowell Company, and the case as made against it may be conveniently considered at this point. The contention on the part of the complainants is that the Lowell Company, by furnishing the current to the Peninsular Company, which in turn furnishes it to the Livingston Hotel to be there used in infringing apparatus, is a joint contributor with the Peninsular Company to the alleged unlawful use of the apparatus in the hotel. The facts ui>on which this contention turns have been already stated. They are, shortly, that the 'Lowell Company sells the current which it generates to the Peninsular Company, which in turn distributes it to its customers in the city of Grand Rapids, among the rest to the Livingston Hotel. It is not alleged or claimed that there is any specific agreement, or that it is any part, of the contract between the Lowell Company and the Peninsular Company that the latter shall furnish to the Livingston Hotel the current which the Lowell Company sells, and there is nothing in the case to distinguish it from the case of sale of ordinary merchandise to a purchaser, who will, as the vendor expects, sell it to others, who may or will make use of it in violating the rights of others. That, which is sold by the Lowell Company has no particular adaptation for use in the Edison system, but is equally adapted to any and all means of electrical distribution and use. The doctrine of contributory infringement has never been applied to a case where the iliing alleged to be contributed is one of general use, suitable to a great variety of other methods of use, and especially where there is no agreement or definite purpose that the thing sold shall he employed with other things so as to infringe a patent right. The cases which are cited (Thomson-Houston Electric Co. v. Kelsey Electric Ry. Specially Co., 72 Fed. 1016; Heaton-Peninsular Button-Fastener Co. v. Eureka Specialty Co., 25 C. C. A. 267, 77 Fed. 297) do not support the position taken; for in those cases not only was the thing furnished peculiarly adapted to the infringing use, but the court found, as matter of fact, that there was a wrongful purpose on the part of the contributing defendant that the article supplied should be so used. These are the characteristics of a case for making one liable as a contributory infringer. My conclusion upon this branch of the case is that, as to the Lowell Company, the bill must be dismissed.
The case against the Peninsular Company involves not only this, but other and more complicated questions. The bill does not charge the defendants specifically as contributing only to the infringement complained of, but charges that they “use or cause to be used” tin* infringing apparatus. Perhaps it is not necessary that the bill should make a distinction between a party directly infringing, and one who contributes to an infringement by another, but the charge
If this is a correct statement of the law, it must follow that this bill cannot be sustained as against the Peninsular Company upon that ground. But it appears that it supplied die transformers intervening between the generator- and the house wiring, and a different question arises upon that circumstance. It is urged in behalf of the complainants that this completed the Edison system, and that the Peninsular Company became a contributor in thus making it up. On the other hand, it may be said that it is indifferent to the Peninsular Company in what machinery or by what method the current, after it leaves their lines, is used in the hotel, — whether by the Edison, the Stanley, or some other method. If it is used by some other method than the Edison method, it is not contended that the defendants’ apparatus, when joined to that of the hotel, would infringe. Indeed, (he contrary is substantially admitted. And the defendant the Peninsular Company in its answer insists (hat it is not responsible for the use made in (ho hotel after it has delivered the current. The leaning of my judgment is against the contention of the Peninsular Company, and that their defense upon this ground cannot he maintained. But I do not find it necessary to decide this question, for, in my opinion, there is no infringement by the proprietors of the Livingston Hotel. The validity of (he complainants’ patents is not disputed; nor can it he doubted that they were duly assigned to the Edison Electric Light Company, as stated in the bill. The relation of the Edison Light Company of Grand Bapids to the other complainant, and its interest in the patents, is thus set forth in the eighteenth paragraph of the bill:
“And your orators further show unto your honors that your orator Ifldison Light Company of Grand Rapids has had since the 8tst day of December, 1886, and now lias, the exclusive right and license to use apparatus embodying the raid invention under said letters patent, and each of them, within the corporate limits of the city of Grand Kapids, for central-station lighting, and, with certain exceptions, for isolated lighting.”
This, being interpreted, imports (hat on December 31, 1886, the Edison Electric Light Company granted an exclusive license to the Ci-and Bapids Company to use the inventions in question within the limits of the city for central-station lighting, with certain exceptions, of which it: is not alleged that the Livingston Hotel was one. It not being stated that the license was for a shorter period, it is to be inferred' that it was for the life of the patents. Plow Works v. Starling, 140 U. S. 184, 195, 11 Sup. Ct. 803. The court is required to deal with the ease as it is presented by the pleadings. Some of the argument of- counsel for the complainant is based upon the license as it appears in (he testimony, and it is claimed from that that the license was more restricted than from the allegations of the bill it would appear to be. This instrument was competent and admissible
In order to ascertain what were the rights and powers of the Grand Rapids Company under the license, it is necessary to take into view the position and objects of the parties. The extract from the brief of counsel for complainants, already made, frankly exhibits these matters in part. In another part of the brief it is further said:
“The complainant Edison Electric Light Company 'has from the time of its organization, in 1886, conducted its operations upon a definite business scheme. That scheme was to hold and retain the title to all patents acquired by it, and including the patents here in suit, and to provide for the employment of the inventions so patented by a single central-station company in each municipality of such size as to warrant the operation of such a subconcern. This business” scheme, contemplated from the start, has been carried out from Maine to California,' and from the Great Lakes to the Gulf. In each important municipality will be found an Edison Lighting Company, and having substantially the same rights under the Edison Electric Light Company’s patents. All of these local or subcompanies, for their use of the inventions covered by the complainant Edison Electric Light Company’s patents, have paid to the latter concern a royalty consideration.”
The Edison Light Company of Grand Rapids was organized to supply electrical current to others. By its charter, that was its business. It was not a manufacturer. If it engaged in putting in apparatus, as-it probably was expected it would, that was an incident to its proper business, and made necessary by the peculiar circumstances. It was intended that it would license others to use the apparatus, by which its product would be made available to the public, and the apparatus intended was the Edison Company’s system. Without that, the Grand Rapids Company’s license was of no value.
Nobody contemplated that the consumers would be required to obtain an express license from either company, either to make or use the apparatus. If the circumstances indicate such an intention, a license to use implies a license to make the thing to be used. Stone Cutter Co. v. Shortsleeves, 16 Blatchf. 381, Fed. Cas. No. 13,334; Woodworth v. Curtis, 2 Woodb. & M. 524, Fed. Cas. No. 18,013; Montross v. Mabie, 30 Fed. 234; Oliver v. Chemical Works, 109 U. S. 75, 3 Sup. Ct. 61. In the present case the circumstances clearly indicate that this was the intention, and the subsequent conduct of the parties confirms the implication. The first trace of any question of the authority of consumers to make the apparatus they were to use is found in the position taken in behalf of the complainants" in the pending case. It would not be going far wrong, as I think, to treat the Grand Rapids Company as a creature of the Edison Electric Light Company, organized for its own purposes, and a mere agency for transacting its business at Grqnd Rapids. If this be so, there, is little merit in the strenuous attempt to repudiate its authority to grant a license to its customers; for it was a consideration given in
When the Edison Electric Light Company granted its exclusive license to the Grand Rapids Company, it took its royalty for the making and using of all apparatus which it was expected arid intended (hat the licensee should make, or cause or permit to be made, for using the inven (ions specified. In turn, the licensee received ids royalty from its customer when it caused the construction of the apparatus in the hotel at the cost of the customer, and secured the contract for furnishing the current. In this instance, the licensee itself furniahed the material and constructed that portion of the work which embodied the essence of the “Edison three-wire system,” in the hotel. This it did under contract, and received S-514 in payment therefor. That sum was the actual cost of the material and construction. Much stress is laid upon this latter fact, and it is con-ronded 1 hat no consideration was received by the Edison Light Company of Guard Rapids for putting in the works, and therefore nothing to support a license; and from Bus it is further argued that it cannot be supposed that the company intended that any license accompanied the construction and sale of the apparatus. But it is incorrect to nay there was no consideration. The contract for putting in the works was parcel of an entire transaction, which also included a contract for taking electrical current for use in the hotel, and the benciir of that contract: constituted the consideration for putting in the works. The company did not. give its Cum: and attention to the matter as a gratuity. The owners of the hotel invested (heir money to the amount above stated in the apparatus. It became their own property, and a fixture in the hotel. It was of little or no value for removal elsewhere. It would seem that the same result would follow' if the owners of the hotel had caused the works to be put in by some one else with (he sanction of the company. But it is argued that, if a license to use this apparatus passed with the making and in stalling it in the hotel, it was merely for use while the hotel continued to take its current from the company which put it in.
Tins contention is based upon the suggestion that it is altogether improbable Unit the electric company of Grand Rapids would have consented that the license to use should endure beyond the time during which it would supply current to tiie hotel. There is some weight in this suggestion, hut it is more than counterbalanced by opposing considerations. The contract for the supply of current was for no definite period. There is the same improbability that the owners of the hotel would have incurred this very considerable expense for the accommodation of a contract which might he put to an end at any time. The company might advance its price, and the owners of the hotel would be at the mercy of the company. The only alternative would be the discontinuance of the system which had been installed, or the incurring of considerable expense in con
“Q. State whether or not it was within the contemplation of your company, or the purpose of your company, that the wiring which you installed in the Livingston Hotel should be used for any other purpose than the service of current on the Edison system. Mr. More: I object to that as incompetent, as the witness cannot testify to the intentions and purposes in contemplation of the complainant company. A. No. Q. Between yourself, or yourself acting for your company, and the proprietors of the Livingston, was there any arrangement on that subject? A. At that time there was no other system of properly lighting, so the question could not arise. No other system had been developed at that time. The recent systems have come in since.”
And there is no doubt that this was the fact. The Edison Company at Grand Rapids had not long before organized for the purpose of exploiting the Edison patents, and supposed them to fill the field. No rival had appeared, and no doubt the parties believed that for a long time the company would maintain its position, and continue to supply its customers. In a great measure this expectation has been realized, though probably the rivals have come sooner than expected. But we are to interpret the contract in the light of circumstances then existing, and not by events which have subsequently transpired.
Again, it is urged that the works installed in the hotel constitute only one element of the claims in the complainants’ patents, and that a license to use must be of the whole invention. But the proposition is not sound. It is enough if the thing sold, or authorized to be sold, by the patentee is so far of the essence of the invention that its value is lost or seriously impaired if the vendee cannot use the other parts of it. The vendor must be held to have intended that the other parts, which are incident and necessary to its use in order to give it value, will also be used. No doubt, where the article is adapted to, and valuable for, other and independent use, as in the case of the sale of the prism (Roosevelt v. Electric Co., 20 Fed. 724, cited by the complainants’ counsel), a different rule would prevail. In that case Judge Wallace said:
*679 “Where the article is of such peculiar characteristics that it cannot he dealt in as a trade commodity, and cannot be used practically at all, unless as a part of another patented article of the vendors, It would be preposterous to suppose that the parties did not contemplate its use in that way.”
The distinction is clear enough. The peculiar and distinguishing characteristic of the first of the Edison patents in suit, which is rightly termed his basic patent, was the employment in the house-wiring apparatus of a compensating conductor, running between two outer wires connected with the positive and negative poles of the generator, respectively; the-compensating conductor having offsets running from each side to the side wires, respectively, on each of which offsets an arc was formed at the location of the lamp. By means of the Transformers, a division of the electrical energy borne by the main wires was effected, and by means of the three-wire system the division was continued, and each lamp was rendered independently controllable. The advantage of this arrangement consisted in equalizing and relieving the tension of the current on the wires, which under certain circumstances becomes excessive, and thus overheating is prevented. This device gives the name to what is called in the record the “Edison three-wire system.” Of this patent, Mr. Jenks, the complainants’ expert witness, says:
“It describes and claims wliat has become to be. known, from the form in which the invention has usually been embodied and introduced, as the ‘three-wire system.’ This patent is the fundamental or underlying disclosure covering this compensating system of distribution from a divided source of electrical energy, and several patents have been granted for improvements thereon, at date's subsequent to that of this original patent, one of these subsequent patents be.ing the second Edison patent here in suit, No. 287,516.”
The second patent covers an invention which consists in the interposition, at a point on the lines leading from the generator to the apparatus immediately concerned in the production of light, of transformers, whose function it is to reduce the voltage or tension on the lines leading to them, which is many times greater than can be used on the lighting apparatus, to a moderate voltage, such as can conveniently be employed at the latter point. This rendered less wiring necessary on the main lines, and it also assisted in regulating the flow of current to the lamps. The latter invention is an improvement of the former. In both, the essential feature was the construction of the regulating devices in the illuminating apparatus, speaking with reference to its service in lighting. Other elements, such as generators, transformers, and lamps, were not new, and were incidents to the main feature.
In accordance with controlling rules of law, it must be held that the sale and construction, as fixtures in the hotel building, of the apparatus embodying the substance of the invention, carried with it the right to use the subsidiary and co-operating elements, which was, in the contemplation of the parties, necessary to make the former useful.
A further contention of counsel for complainants is that the method employed by the Edison Light Company of Grand Rapids involved only the elements of the first patent, and did not involve the invention covered by the second, — that is, did not involve the employment
Complainantsmlaim also that importance should be attached to the fact that the hotel owners in 1894 made a modification of the house wiring, so as to convert it into the “two-phase three-wire construction” of the Stanley system, which they used for part of that year, and that this demonstrates that the house wiring is susceptible of a noninfringing use. But there are two answers to this. In the first place, it has no tendency to show what the intention of the parties or the legal effect of their contract in 1888, made while the art was in its infancy, was; and, secondly, the experiment was not successful, and it was found necessary to take out the modification, and revert to the Edison system. The Stanley system cast too great a load upon the central wire, and overheated it. It appears that the transformers, introduced into the apparatus in 1896, when the Peninsular Corapany' commenced to supply current, were not the transformers of the second Edison patent, but were the transformers of the Stanley system. What the effect of that would be upon the question of infringement would depend upon the scope of the second Edison patent, and a comparison of the transformers of the two systems, if the Edison patent is hot broad enough to cover any kind of transformer. But, as I reach the conclusion that the bill cannot be maintained for other reasons, it is unnecessary to pursue that inquiry.
Since the case was submitted a stipulation of counsel for the parties has'been filed, whereby the controversy is limited to the question