77 F. 288 | 6th Cir. | 1896
After the foregoing statement, the opinion of the court was delivered by
Staples in size and form adapted to use in such machines are unpatented articles, and not even an element in a combination claim. They are therefore no more within the direct monopoly of the patents than are the buttons to be affixed by means of the staples, or the shoe to which both are to be attached. This conceded fact furnishes the foundation for the principal objection to the bill presented by the demurrer. It has been very earnestly and ably argued by counsel for appellees that the restrictions on use imposed by the complainant operate to create a monopoly in an unpatented article, and are therefore void as contrary to public policy, or, if valid as purely legal contracts, are so unconscionable as not to entitle complainant to equitable remedies for their enforcement. This view seemed to meet with the approbation of the learned judge who heard the case below, who, in his opinion, said that he “was persuaded that the patentee’s privilege has its limits, in the rights and interests of the public, and that it is an abuse of his privilege to so shape his dealings with his patent as to secure a monopoly upon an unpatented article.” This presents a question somewhat novel, and of wide general interest. The restriction imposed by the Peninsular Novelty Company, the assignors under
“Condition of Sale.”
“This machine is sold and purchased to use only with fasteners made toy the-Peninsular Novelty Company, to whom the title to said machine immediately reverts upon violation of this contract of sale.” :
The bill further charges that the complainant corporation has suc: ceeded to all the patents, property rights, titles, contracts, and contract rights of the Peninsular Novelty Company, and has continued the manufacture and sale of button-fastener machines under conditions and restrictions identical in terms and notoriety with the meth-. ods pursued by the predecessor company. If we, for the present, assume the legality of the conditions and restrictions imposed upon the purchasers of such machines, it is highly important to an orderly disposition of other questions that we shall, at the outset, determine whether the purchasers of the machines made and sold under complainant’s patents are guilty of any infringement of the monopoly of the patents by using with such machines fasteners or staples not made by the patentee. Undoubtedly, the general rule is that if a patentee make a structure embodying his invention, and unconditionally make a sale of it, the buyer acquires the right to use the machine without restrictions, and, when such machine is lawfully made and unconditionally sold, no restriction upon its use will be implied in favor of the patentee. By such unconditional sale the machine passes without the limit of the monopoly. Adams v. Burke, 17 Wall. 453-457; Mitchell v. Hawley, 16 Wall. 544-547. That the complainant has attempted to state a case not within this rule is very obvious, for it charges that every sale has been under an express restriction as to the use of the invention embodied in the machine. In view of the conspicuous character of both the machine and the notice permanently affixed thereon, every one buying must be conclusively presumed to have notice that the owners of the patents intended by the inscription on the machine to grant only a restricted license for its use, and it is difficult to see why such purchaser is not to be regarded as acquiring and accepting the structure subject to this restriction. The buyer of the machine undoubtedly obtains the title to the materials embodying the invention, subject to a reverter in case of violation of the conditions of the sale. But, as to the right to use the invention, he is obviously a mere licensee, having no interest in the monopoly granted by the letters patent. A license operates only as a waiver of the monopoly as to the licensee, “and estops the licensor from exercising its prohibitory powers in derogation of the privileges conferred by him upon the licensee.” feob. Pat. §§ 806-808. It has been said that the sole matter conveyed in a license is the right not to be sued. Hawks v. Swett, 4 Hun, 146. A licensee is one who is not the owner of an, interest in the patent, but who has, by contract, acquired a right to make or use or sell machines embodying the invention. Gaylor v. Wilder, 10 How. 477; Oliver v. Chemical Works, 109 U. S. 75, 3 Sup. Ct. 61; Rob. Pat. §§ 606-608. All alienations of a mere right to use the invention operate only as licenses. It must follow, therefore, that the purchaser of one of complainant’s machines subject to a restricted
“The licenses do not, any of them, purport to give the defendants an unlimited use of any of the patents, hut only a restricted right to malee machines of certain sizes and descriptions; so that, when defendants made machines not in conformity to the licenses, they violated, not only their express covenant not to do so, hut also the complainant’s patents, or some of them, covering such machines.”
In Steam Cutter Co. v. Sheldon, 5 Fish. Pat. Cas. 477-487, Fed. Cas. No. 13,331, the license was to use one machine “in their quarries at West Rutland, and in no other place or places.” The licensee permitted the use of the machine in another quarry by a third person. Judge Woodruff said:
“In that infringement of the rights of the complainants, the defendants find no defense in the agreement. They are, with the Rutland Marhle Company, joint infringers.”
See, also, the very satisfactory text of Rob. Pat. §§ 812-815, 1250, and the notes, citing many other cases.
This brings us to consider the objections urged against the rather novel restrictions contained in the licenses granted by complainant. The very able counsel for appellees have urged very forcibly an argument based upon principles of public policy in respect of monopolies and contracts in restraint of trade, and have contended that public policy forbids a patentee from so contracting with reference to his monopoly as to create another monopoly in an unpatented article. We are not at all prepared to say that there are no limita
“The right which the patentee or his assignee possesses in the property created by^the application of a patented discovery must be enjoyed subject to the complete and salutary powers, with which the states have never parted, of so defining and regulating the sale and use of property 'within their respective limits as to afford protection to the many against the injurious conduct of the few.”
On substantially the same ground it was decided in Vannini v. Paine, 1 Har. (Del.) 65, that the patentee of a mode of drawing lotteries, and engaged in the business of drawing lotteries in the state of Delaware, was not protected by his patent from prosecution under the law of Delaware making the drawing of a lottery a criminal offense. In other words, a prohibited business is not protected by the patent laws of the United States because it is conducted through instrumentalities, the subject of patent rights.
The case at bar presents no question affected by the principles underlying either of the class of cases we have cited. What we are asked to do is. to mark another boundary line around the patentee’s monopoly, which will debar him from engrossing the market for an article not the subject of a patent. To do this, we are asked to say that he cannot license others to use his invention on condition, that they shall use it only in conjunction with a nonpatentable article made by himself. The only reason suggested for this limitation upon his right to define the terms upon which others may use his invention is that a monopoly in the unpatented article may thereby be created. Upon what authority are we to circumscribe the exercise of the privileges awarded a patentee? In considering any question in respect of restraints upon the liberty of contracting, imposed by principles of public policy, we should bear in mind that very high considerations of public policy are involved in the recognition of a wide liberty in the making of contracts. This caution was well expressed by Sir George Jessell in Registering Co. v. Sampson, L. R. 19 Eq. 462-465, who said:
“It- must not be forgotten that you are not to extend arbitrarily those rules which say that , a given contract is against public policy, because, if there is one thing which, more than anotha’, public policy requires, it is that men of full age and competent understanding shall have the utmost liberty of contracting, and that their'contracts, when entered into freely and voluntarily, shall be held sacred, and shall be enforced by courts of justice. Therefore you have this paramount public policy to consider, — that you are not lightly to interfere with this freedom of contract.”
'Especially is this caution applicable when we sit in judgment upon the limitations which a patentee may put upon the use of his invention. If he see fit, he may reserve to himself the exclusive use :of his invention or discovery. If he will neither use his device, nor permit others to use it, he has but suppressed his own. That the grant is made upon the reasonable expectation that he will either put his invention to practical use, or permit others to avail-themselves of it upon reasonable terms1, is doubtless true. This expectation is based alone upon the supposition that the patentee’s interest will induce him to use, or let others use, his invention. The public has retained no other security to enforce such expectations. A sup
Wilson v. Rousseau, 4 How. 674; Pitts v. Wemple, 1 Biss. 93, Fed. Cas. No. 11,194; Grant v. Raymond, 6 Pet. 218; U. S. v. American Bell Tel. Co., 29 Fed. 17; Consolidated Roller-Mill Co. v. Coombs, 39 Fed. 803; Campbell Printing-Press Co. v. Manhattan Ry. Co., 49 Fed. 935. If the patentee choose (o reserve to himself the exclusive use; of his device, and the invention toe of a wide character, and so radical as to enable him to make and sell an unpatentable product cheaper than any other competitor, a practical monopoly of the market for that article will result; and yet no one could say that a monopoly thus secured was illegitimate, or obnoxious to public policy. To illustrate: Let it be supposed that the patents owned by this complainant were of so wide a character as to cheapen the process of manufacturing shoes, and to drive from competition all other inodes of manufacture. Then suppose the patentees were of opinion that they could most profitably enjoy their inventions by retaining the monopoly of the use, and engaging in the manufacture; of shoes. If content to undersell all others, they could engross the market for shoes, to the extent of their capacity to supply the demand during the life of their patents, or so long as their invention was not superseded by subsequent inventions still further cheapening' the cost of manufacture. The monopoly thus secured would be the legitimate consequence of the meritorious character of their invention. Yet just such monopolies may result whenever a new and surprising advance is made in some art of wide and general use. The great consuming public would be benefited, rather than injured, for tlie monopoly could endure so long only as shoes were supplied at a less price than had prevailed before the invention. Yow, if the patentees, by retaining to themselves the exclusive use of their invention, are able, legitimately and lawfully, to acquire a monopoly of the manufacture of shoes, and destroy the shoe market for those who before liad shared it, why may they not, by a system of restricted licenses, permit others to use their devices on condition that only some minor part of the shoe, — the pegs, the tips, the; thread, or the buttons, or the button fasteners, — shall be bought from them? If these concessions were such as to enable others to compete, though their use of the mechanism was restricted by the terms of the license, who could justly complain, if the inventors, content with a monopoly of the market: for the article named in their license, surrendered the opportunity for a monopoly of the manufacture of the complete siioe? The device protected by the patents owned by complainant; is of no such wide or radical character as that used for purposes of illustration. Yet there is no appreciable difference in the legal principles applicable to the supposed facts used for illustration, and those stated on the face of the complainant’s bill. The fact which has affected the makers of wire staples for shoe manufacturing is the in
If we are right in the foregoing conclusions that the users of Peninsular machines, who use therein the button fasteners made and sold by the defendants, thereby infringe the patents for inventions embodied in said machines, it would seem to follow that the defendants, who aid and abet such infringement by intentionally and maliciously persuading and inducing the licensees of such machines to exceed their licenses, and by furnishing them with the means for such infringement are themselves infringers, and liable as tort feasors. The allegations of the bill in this regard are very full and emphatic. Beginning with the distinct averment that there is no market for fasteners adapted in size and shape for use in complainant’s structure, except in connection with those structures, it is then
“Different parties may all infringe by respectively making or selling, each of them, one of the elements of a patented combination, provided those separate elements are made for the purpose and with the intent of their being combined by a party having no right to combine them. But the mere manufacture of a separate element of a patented combination, unless such manufacture be proved to have been conducted for the purpose and with the Intent of aiding infringement, is not, in and of itself, infringement.”
The case of Wallace v. Holmes, 9 Blatchf. 65, Fed. Cas. No. 17,100, is a leading case illustrating the rule we deem here applicable. The complainants had a patent for an improved burner, in combination with a chimney. The defendants made and sold the burners alone, leaving the purchaser to supply the chimney, without: which the burner was useless. This was done for the express purpose and with the intent of making a proñt through an infringement of the complainants’ patent. The rule of law invoked by tbe defendants was this:
“That, where a patent is for a combination merely, it is not infringed by one who uses one or more of the parts, hut not all, to produce the same results, either by themselves, or by the aid of other devices.”
To this the the court responded as follows:
“But I am not satisfied that this rule will protect the defendants. If, In actual concert with a third party, with the view to the actual production of the patented Improvement in lamps, and the sale and use thereafter, they consented to manu*298 facture the burner, and such other party to make the chimney, and in such concert they actually make and sell the burner, and he 1he chimney, each utterly useless without the other, and each intended to be used, and actually sold to be used, with the other, it cannot be doubtful that they must be decreed to be joint infringers' of the complainants’ patent. It cannot be that, when a useful machine is patented as a combination of parts, two or more can engage in its construction and sale, and protect themselves by showing that, though united in an effort to produce the same machine, sell, and. bring it into extensive use, each makes and sells one part only, which is useless without the other, and still another person, in precise conformity with the purpose in view, puts them together for use. If it were so, such patents would indeed be of little value. In such cases all are tort feasors, engaged in a common purpose to infringe the patent, and actually, by their concerted action, producing that result. * * * Here the actual concert with others is a certain inference from the nature of the case, and from the distinct efforts of the defendants to bring the burner in question into use, which can only lie done by adding the chimney. The defendants have not, perhaps, made an actual prearrangement with any particular' person to supply the chimney to be added to the burner, but every sale they make» is a proposal to the purchaser to do this, and his purchase is a consent with the defendants that he will do or cause if to be done. The defendants are therefore active parties to the whole infringement, consenting and acting to that end, manufacturing and selling for that purpose.”
There are many other cases in accord with those from which we have made extracts, a few of which are Holly v. Machine Co., 18 Blatchf. 327, 4 Fed. 74; Travers v. Beyer, 26 Fed. 450; Willis v. McCullen, 29 Fed. 641; Alabastine Co. v. Payne, 27 Fed. 559; Celluloid Manuf’g Co. v. American Zylonite Co., 30 Fed. 437; Boyd v. Cherry, 50 Fed. 279; Supply Co. v. McCready, 4 Ban. & A. 588, Fed. Cas. No. 295.
Morgan Envelope Co. v. Albany Perforated Wrapping Paper Co., 152 U. S. 425, 14 Sup. Ct. 627, has been much relied upon by the defendants.- The claim of the patent involved tvas for a combination of a mechanism for the delivery of paper, to be delivered as Used, with a paper roll, the subject of an independent patent. The infringement charged consisted “in selling oval rolls of paper of .'their own manufacture, with fixtures manufactured and sold by the ■plaintiffs, in combination with their paper, to persons other than the ■defendants, the fixtures having been obtained by the defendants from the original purchasers of the patented combination, and also -by selling oval rolls of paper of defendants’ own manufacture to persons who had previously purchased fixtures and paper from the ’plaintiffs, with the knowledge and intention that the paper so sold Avas to be used in connection with the plaintiffs’ fixtures.” It also 'appeared that it had not been the practice of the plaintiffs to sell ■fixtures independently of its paper, and that they sold only to such parties as dealt in and used their paper. “Purchasers were also re- - quired to buy a given quantity of paper to a given number of fixtures, to be sold only in connection with the paper, the rule being not to ■ sell more than one fixture to one case of paper. The fixtures were ‘also sold to hotels and other public buildings, with the understanding that their paper would be subsequently purchased of the plaintiff company.” The court adds that “it appears to have been its invari1 able rule to' refuse to sell its fixtures except to persons also ordering ^jjaper.”No question was made as to the novelty of the mechanism employed as a fixture for the delivery of paper as desired by the user.
“So far as fixtures sold by defendants, which had been originally manufactured and sold by the patente* to other parties, are concerned, it is evident that, by such original sale by the patentee, they passed out of the limits of the monopoly, and might be used or sold by any one who had purchased them from the original vendees. The patentee having once received his royalty upon such device, he cannot treat the subsequent seller or user as an infringer. Bloomer v. McQuewan, 14 How. 539. As was said by Mr. Justice Clifford in Chaffee v. Belting Co., 22 How. 217-223: ‘When the patented machine rightfully passes to the hands of the purchaser from the patentee, or from any other person authorized to convey it, tire machine is no longer within the limits of the monopoly. * * * By a valid sale and purchase, the patented machine becomes the private individual property of the purchaser, and is no longer protected by the laws of the United States, hut by the laws of the state in which it is situated.’ See, also, Bloomer v. Milleugcr, 1 Wall. 340; The Paper-Bag Cases, 105 U. S. 766, 771. In this latter case, one Morgan had purchased a machine for making paper bags of tbe patentee; and it was held that, having the absolute ownership ol’ the machine, he had the right either to use it during the existence of the letters patent, or to transfer such ownership and right to another. It was said that ‘the power to sell the machine and transfer the accompanying right of use is an incident of unrestricted ownership.’ Birdsell v. Shaliol. 112 U. S. 485, 5 Sup. Ct. 244; Woodworth v. Curtis, 2 Woobd. & M. 524, Fed. Cas. No. 18,013; Goodyear v. Rubber Co., 1 Cliff. 348, Fed. Cas. No. 5,557.”
With respect to the second question the court said:
“The real question in this case is whether, conceding tiie combination of 'the ova! roll with the fixture to be a valid combination, the sale of one element of such combination, with the intent that it shall be used with the other clement, .is an infringement. We are of opinion that it is not. There are doubtless many cases to the effect that the manufacture and sale of a. single element of a combination. with intent that it shall be united to the other elements, and so complete tho eombiiiauon, is an infringement. Saxe v. Hammond, Holmes, 456. Fed. Cas. No. 12,411; Wallace v. Holmes, 9 Blatchf. 65, Fed. Cas. No. 17,100; Barnes v. Straus, 9 Blatchf. 553, Fed. Cas. No. 1,022; Schneider v. Pountney, 21 Fed. 399. But we think these cases have no application to one where the element made by the aiieged infringer is an article of manufacture perishable in its nature, which it is the object of the mechanism to deliver, and which must he renewed periodically. whenever the device is put to use. Of course, if the product itself is the subject of a valid patent, it would be an infringement of that patent to purchase such product of another than the patentee; hut. if the product be, unpatentable, it is giving to the patentee of the machine the benefit of a patent upon the product, by requiring such product to be bought, of him. To repeal an illustration already .put: If a log were an element of a patentable mechanism for sawing such log, it, would, upon the construction claimed by the plaintiff, require the purchaser of, the.sawing device to buy his logs of the patentee of the mechanism, or subject himself to á charge of infringement. This exhibits, not. only the impossibility of this construction of the patent, but the difficulty of treating the paper as an element of the combination at all. In this view, the distinction between repair and construction'becomes of no value, since the renewal of the paper Is, in a proper sense, neither the one nor tho other.”
It is true that Mr. Justice Brown, in discussing the question involved in that case, assumes that a combination of the machine for delivering the paper with the paper to be delivered was valid. lint, before he finishes the argument'lie shows that the assumption leads',
The suggestion has been made that, although defendants may be guilty of infringement, complainant’s remedy at law is adequate, and, under the circumstances of the case, equity ought not to accord to the patentee the equitable relief of injunction. As to this aspect of the case, it would seem clear that, if complainant has imposed a legal restriction upon the use of the inventions embodied in the structures made and sold by it, the remedy at law is wholly inadequate, and relief by injunction should be awarded upon the case stated in the bill. As to this the court below seemed to entertain no serious doubt; for Judge Severens, in replying to the suggestion that as defendants were not engaged in the use of complainant’s machines, and were only concerned “in selling, to those who were so employed, a nonpatented article, — an article constituting no part of the patented thing, — were not, therefore,, accountable to the complainant,” said:
“I am not dear, however, that this distinction can he maintained upon the allegations of this bill, which are very broad and emphatic in asserting, not merely that the defendants make and sell the staples, but that, they actively persuade the users of the machine to violate the supposed rights secured to the complainant by the patent, and the restriction in the sale of its machines. It would rather seem that, if the complainant has such rights as it asserts, the defendants would, upon such facts, be tort feasors, and that equity would restrain them, in the circumstances alleged.” 65 Fed. 620.
