19 Del. Ch. 359 | New York Court of Chancery | 1933
The first ground of demurrer is that the complainants have an adequate remedy at law. It is urged in support of this ground of demurrer, that the bill shows nothing more than a breach of contract which is adequately compensable in damages, and that a court of equity should therefore take no cognizance of it.
The contract makes a “transfer and assignment * * * to the Kelly Company of the exclusive world rights, covering the Matzka processes for working and/or preserving, without the use of preservatives, fruits, vegetables and coffee and all kinds of food and drink products * * * during the life of the longest patents taken out and under all secret processes so long as any business is being carried on under any of them, these rights covering the entire world, excluding only Belgium and that portion of the British Empire lying outside of North and South America and contiguous islands.” (I make no mention of the special product of eggs, because the details with respect to that product are immaterial, the contract before its conclusion applying the broad grant of rights evidenced by the above language to that commodity as well as to all other foods.)
The language of the grant which I have just quoted appears in the first paragraph of the contract and the comprehensiveness of its phraseology is either repeated or impliedly accepted by the parties to the contract in later paragraphs, as expressive of their intent. I refrain from pointing out the language found in those later paragraphs. It is sufficient to say that nowhere in the contract have I been able to find any language which in any sense curtails the broad grant of right conferred by the language herein-before quoted.
The mere fact that an instrument is not in point of form an assignment of a patent, does not necessarily mean that it is not one. The right which a patentee holds under our Act of Congress is a monopoly for the designated time “to make, use and vend.” If, however, an exclusive right is conferred by a patentee upon another to make, use and vend the patented article within a certain district to the exclusion even of the patentee, in that case the law regards it in point of substance, though not of form, as an assignment and not a license. It was so stated by Mr. Justice Gray, speaking for the Supreme Court of the United States in Waterman v. Mackenzie, 138 U. S. 252, 11 S. Ct. 334, 335, 34 L. Ed. 923. The legal effect of such a grant of right is to give to its conferee the entire rights which the patentee possessed in the defined district and is therefore just as broad as though the formal language of assignment had been employed. “Whether,” said the court in that case, “a transfer of a particular right or interest under a patent is an assignment or a license does not depend upon the name by which it calls itself, but upon the legal effect of its provisions.” See, also, Paulus v. M. M. Buck Mfg. Co., (C. C. A.) 129 F. 594, 596; Johnson R. R. Signal Co. v. Union Switch & Signal Co., (C. C.) 59 F. 20. It is to be borne in mind that what the contract in this case is con
The suggestion is advanced that the complainant corporation may sue at law for the damages occasioned by the Kelly Company’s alleged abandonment of the contract. That remedy, however, is not an adequate one. The compensation which the Matzka Corporation receives under the contract in consideration of the exclusive rights granted by it, is in the form of a royalty of a certain per cent, of the gross sales prices of the products in connection with which the Matzka processes are used. There is no provision for a minimum royalty. The language of the Circuit Court of Appeals of the United States in Neenan v. Otis .Elevator Co., 194 F. 414, 420, upon the question of adequacy of the legal remedy of damages, is applicable to the instant one. In that case the court said:
“The complainant has no adequate remedy at law. No rational rule of damages can be formulated upon the facts as shown; any verdict rendered would have nothing but speculation and guesswork to support it. In such cases the right of the injured party to rescind is well recognized.”
What has thus far been said rests upon the assumption that there has been an abandonment of the contract, as the bill alleges, predicated on the unexcused failure of the Kelly Company to go forward with its performance. On that assumption, the reasons hereinbefore noticed as being
The defendants, however, by their last ground of demurrer, while admitting for the purposes of the demurrer that the Kelly Company has failed to perform the contract, attack the bill as defective in that it omits to make an allegation of performance of acts required by the contract to be performed by the Matzka Corporation before the Kelly Company’s failure to perform can be said to be unwarranted and therefore inexcusable. This ground of demurrer is to the effect that the complainant in a bill for rescission must show himself not to have been in willful default.
The solicitor for the complainants contends that while in a bill for specific performance a complainant must show either performance or a relieving excuse, yet in a bill for rescission no such requirement of pleading is exacted of him, because in the former he seeks the aid of equity in active enforcement of the contract, whereas in the latter he seeks the aid of equity merely to obliterate the contract. Black in his work on Rescission and Cancellation (2d Ed.) Volume 3, § 553, states the following to be the law:
“The right.to rescind a contract on the ground of failure of performance by the other party * * * cannot be claimed by a party who is himself in default in the performance of any of the obligations imposed upon him by the contract. Where a complainant, seeking the rescission of a contract, has not done all that he stipulated to do, or has not placed himself in a situation to be ready to do so, upon compliance of the other party, the court will not interpose in his behalf.”
And upon the question of- pleading the same author, in Section 664 of Volume 3 of his work, states the rule to be that “the bill of complaint should also show that the plaintiff is free from any fault, breach of contract, or fraud, so that he has a good standing in equity.”
The complainant’s case cannot be said to be shown as complete where the bill which states it leaves room to say that the defendant’s failure to perform (which is urged as a manifestation of abandonment) may very well have been justified by the failure of the complaining party to perform conditions which the contract imposes upon him as a prerequisite to the defendant’s performance.
That is the situation in this case. The contract here speaks of a certain machine which appears to be necessary for the working of the Matzka process. The language of the contract is:
“It is understood that a machine capable of working four tons a day of products under the Matzka process has been built by the Jackson Company of Scotland. The Matzka Company and Matzka guarantee that the said machine together with complete drawings, plans and specifications will be delivered forthwith to the Kelly Company, in order that the Kelly Company may start immediate operations of the Matzka process.” (Title to the machine was to vest in the Kelly Company upon its payment of the balance due the manufacturer. But the complainants were to deliver it forthwith.)
The bill nowhere alleges that the complainants delivered the machine together with complete drawings, plans and specifications, to the Kelly Company. If the Kelly Company’s admitted failure to exploit the process is due to the want of the specially designed machinery and knowledge of its drawings, plans and specifications from
Until the complainants allege that they have performed the important obligations just referred to as imposed upon them by the contract, or allege facts which constitute a valid excuse for non-performance, I am of the opinion that the defendants should not be required to answer the bill.
It is true that the complainants allege that the defendants have abandoned the contract. But the bill specifies the facts evidencing the abandonment, and those specifications of fact turn out to consist of non-performance, which it appears to me is not culpable if the machine, its drawings, plans and specifications were not delivered as guaranteed by the complainants.
The demurrer will be sustained for the reason stated in support of the last ground of demurrer. '
Order accordingly.