34 F. 877 | U.S. Cir. Ct. | 1888
This is a hill in equity whereby the complainant sacks a decree enjoining the defendant from the manufacture and sale of bicycles and tricycles containing certain devices, and for an accounting. The hill charges that complainant on the 1st day of December, 1884, and for a long time prior thereto, was engaged in the manufacture and sale of bicycles, tricycles, and other velocipedes of superior quality, grade, construction, and finish, and was the owner of a large number of patents, the features of which were embodied in the construction of such vehicles; that on the 1st day of December, 1884, complainant entered into a contract with the defendant, whereby there was granted to the defendant the right to make, use, and sell, for a certain term therein mentioned, bicycles of 52-ineh size, and upwards, of certain grades, style, and finish, and to be sold at a certain price limited by said contract, and embody
There is no contest between the parties as to the execution of the instrument set out in the bill; and the only question made by the defendant is as to whether the domplainant under the contract is entitled to the relief asked for, or any relief, from a court of equity. The contract in question recites in the opening paragraph that complainant is the owner of certain patents, amounting to 65 in all, giving the number and date of said patents, and the names of the patentees respectively; and by the first article of the contract the defendant is licensed to manufacture in the city of Chicago bicycles of 52-inch size and upwards, embodying the inventions set forth in 15 of the patents enumerated in the opening paragraph or preamble, and no others; and in the ninth article, the defendant agrees that he; will not import, manufacture, or sell, either directly or indirectly, any bicycle, tricycle, or other velocipede, or the pedals, saddles, bearings, rims, or other patented parts, or devices containing any of the inventions claimed in either of said recited letters patent; nor make, use, or sell such vehicles containing any of the devices or inventions covered ,by any of the patents recited in the preamble of the contract, other than those which were specifically mentioned in the licensing clause; nor, in any way, either directly or indirectly, dispute or contest the validity of said letters patent, or either of them, or the title of the complainant thereto. The eleventh clause of the contract gave to the complainant the right to cancel and terminate the license on the occurrence of certain conditions; and also contained a clause allowing the defendant to surrender the license tontained in said contract at any time by written notice to that eiffect, and returning said contract to the complainant. It was, however, expressly provided that no such revocation or surrender, and no termination of said contract, or any part of it, should release or discharge the defendant from the obligations, admissions, and agreements, contained in the sixth, seventh, eighth, ninth, and eleventh articles of said contract, which it is recited were a part of the consideration for the granting of the license contained in said contract, and are irrevocable except by the written consent of the party of the first part. It was further agreed that if the defendant should continue after the termination of such license to make, sell, or use any machine, or substantial part thereof, containing either of the parts specifically referred to in the ninth article, or any invention in any form set forth and claimed in any of the letters patent recited, the complainant should have its remedy for a breach of said contract, or the defendant might be liable to the complainant as an infringer
It is contended on the part of the defendant that this contract was entered into with the express understanding on his part that it was not to continue later than the 1st day of .April, 1886, by which time all the patents enumerated in the licensing clause of the contract, which the defendant used in the manufacture of his bicycles, would have expired; and that the defendant, by inadvertence and mistake, and without knowing the full import of articles 9 and 11, and without knowing that by the terms employed in said articles the obligations of the contract were perpetuated as to all the complainant’s patents, executed said contract upon the understanding and with the belief that, whenever the licensing portion of said contract was at an end, ho was relieved from all the obligations contained in the contract. In other words, the position of the defendant is that, as he understood the contract at the time he executed it, none of its provisions bound him beyond the time when the contract should be terminated by either party. It will be seen from the statement that this contract develops an attempt on the part of the complainant to bind the defendant not to use any of the devices covered by the complainant’s patents, although said patents were not the subject-matter of complainant’s license to defendant, and to bind the defendant with specific admissions of the validity of all of said patents, and each and every claim thereof, and of the complainant’s title thereto; and in case the defendant should use any mechanism covered or claimed to bo covered by a claim in any of those patents, to give the complainant a summary remedy against the defendant by estopping him from denying the validity of the patents, and compelling him to answer in damages for such use. As has been already said, the proof shows that the defendant held two licenses granted by the complainant on the 13th of June, 1883, allow
“We suppose your objection to the ten-years matter arises from the words used at the end of tho fifth line on the sfeeond page, — ‘the 21st day of November, A. D. 1894,’ — which, if objectionable to you, you may erase, and interline in place of tha¡t, ‘the 1st day of April, A. IX 1886,’ and that will relieve this objection. You should not be so much afraid of our wishing or trying to cripple you, and leave the rest of the world free. Some day you will get this idea out of your mind. With the change in the license above noted, that is the way we are willing to give it, and if there is unnecessary verbiage, let it go as our fault. ”
Under date October 29, 1884, the defendant also wrote the complainant, and objected to the contract because it included what is known as the “Peters Patent,” No. 197,289, claimed to cover ball-bearings,'on the ground that he, defendant, had a patent for a globular bearing which lie
When we take into consideration the fact that the defendant’s prior licenses from the complainant contained no clause committing or binding him to any admission as to the validity of any of complainant’s patents which he was not licensed to use, and which had no clause perpetuating or continuing any obligation on the part of the defendant not to use any of the complainant’s patents, or admitting their validity; and also when we consider the fact that the defendant was himself the owner of a large number of patents used in the construction of machines which he was manufacturing, and that he only considered the patents specially covered by the license clause of this contract as in any way useful to him in the manufacture of his machines; and that the complainant had allowed him, without question or challenge, to manufacture bicycles with hall-bearings, hammock-saddles, bifurcated backbones, and rubber bandies; in fact, containing all the special features covered by other patents also held by the complainant; and consider the manner in which the defendant insists that he does not wish a license to extend beyond the life of the patents which he was then using, — we think there can be no doubt that the defendant, at the time be executed this instrument, supposed in good faith that when the license terminated, either on the 1st day of April, 1886, or earlier, as it might by the action of either party, all the obligations it contained were also at an end, and, doubtless, the defendant executed this instrument upon that supposition, and bad no thought that he was binding liimself for all time, or at least for the lifetime of all the complainant’s patents, to an admission of their validity, and every claim thereof, and of the complainant’s title thereto, with a covenant that he would not use the devices which wore covered or included in any of those claims; in other words, that he was giving away his own patents, covering some of the same devices, and admitting that the 1’eters patent, for instance, which was not a patent for ball-bearings, but, at most, only a patent for adjustable roller-bearings, was valid, and prevented the use by him of his own patent for globular bearings. The defendant did not apply for or ask any new license from the complainant, but only for the complainant’s consent that he might, under his then existing licenses, make larger and more highly finished machines. He did not ask the right to use another one of the many patents which the complainant owned, as the defendant was all the time insisting, apparently with the acquiescence of the complainant, that all the patents belonging to complainant which he used, or had any use for in his business, expired before April 1, 1886, and were included in the two licenses taken by him June 13, 1883, and this license of December 1, 1881;
For reasons which defendant evidently did not then understand, but which are now perfectly clear, the complainant refused to indorse upon the old license then held by the defendant the permission which he asked to make the larger machines under the same patents he Avas then licensed to use, and insisted on the defendant taking a new license; and the defendant, if he read these elaborate and carefully worded clauses, evidently assumed they would only be operative while the license remained in force, and'that when he surrendered it he terminated all the contract relations that the license created. For instance, in article 8 of the contract of December 1, 1884, defendant is made specifically to admit the validity of all patents enumerated in the preamble to the contract, and each and every claim thereof, and complainant’s title thereto; that the inventions claimed in patent No. 194,980, which is the Whitehead patent, granted September 11, 1877, for a balanced gear, whereby one driving-wheel of a tricycle may rotate faster than the other. The Peters patent No. 197-289, which is for a laterally adjustable roller-bearing, neither of which patents are included in the licensing clause of either of said contracts, are embodied in the defendant’s Columbia and Victor tricycles, and his Expert and Eolus machines; and further expressly admits that any machines or parts of machines constructed in a substantially similar man-
“Not to make, use, or sell, directly or indirectly, either backbones bifurcated for a rear wheel, or balance gear, allowing two wheels abreast, differing speeds on curves, or bearings containing balls or rollers and laterally adjustable, or brakes combined with the handle-bars and front wheel, or cranks adjustable to different lengths of throw, or forks of tubular construction, or mud-shield for steering wheels, constructed to turn with the wheel, or pedals that are polygonal or offering two or more sides tor the foot, or round, contractible rubber tires in grooved rims, or rims containing or adapted for rubber or elastic tires, or saddles, adjustable fore and aft, or saddles having a flexible seat and means of taking up the slack, or steering heads, open or cylindrical, with stop from complete turning, or leg-guards over front wheel, or rims of wrought metal tubing, and adapted to receive a tire, or rims composed of sheet metal with overlapping edges, or wheels containing hollow metallic rim and rubber tires, or steering spindle and fork inclined to each other at an angle, or two speed or power gears, or tangent spokes, or Warwick rims, or any other device or invention secured by either of these patents other than according to the permission, conditions, or description in paragraph numbered ‘First’ in this agreement, or as otherwise agreed in writing with the party of the first part; nor in any way, either directly or indirectly, dispute or contest the validity of the letters patent hereinbefore mentioned, or either of them, of the title thereto of the party of the first part.”
—While tbe eleventh article of the contract contains this clause:
“No termination of this contract or any part of it shall release or discharge the party of the second part from any payment, return, liability, or performance which may have accrued, become due, or arisen hereunder prior to or at the dale of such revocation or surrender, or from the obligations, admissions, and agreements contained in the sections hereof numbered ‘ Sixth,’ ‘Seventh,’ ‘Eighth,’ ‘Ninth,’ and ‘Eleventh’ hereof, which are a part of the consideration for the granting of the license herein, and are irrevocable except by written consent of the party of the first part. ;!t * * And, further, that if the party of the second part shall continue after such termination of license to make, sell, or use any machine, or substantial part thereof, containing either of the parts specifically referred to in section ‘Ninth’ hereof, or any invention in any form set forth and claimed in the letters patent aforesaid, or any of them, the said party of the first part shall have the right to treat the party of the second part either as a party to and in breach of this contract, or as a mere infringer.”
- — An agreement which, if it did not by its terms practically prohibit defendant from making bicycles and tricycles, or either, for nil time clearly did so during the life of all complainant’s patents, several of which hail then been only issued a very few months, except at the will and pleasure of the complainant, and on its own terms; and it can hardly be conceived as possible that a sane man who was engaged in the business of a manufacturer of such machines, and who intended to continue in such business, would have signed such an agreement if be bad fully understood its intended effect and purpose. The contract, read in connection with the letters in proof, shows, as it seems to us, that it was an artfully con
Coming to the conclusion that this instrument was executed by the defendant under a mistaken-understanding of the scope and operation of its terms, we are clear that it is so inequitable, and would operate so oppressively upon the defendant, that it ought not to be enforced in this court. This bill, in effect, seeks a specific performance of this agreement. It asks the court to enforce upon the defendant the admissions and covenants contained in this contract of December 4,1884. Coming into a court of equity, the complainant must show a case that commends itself to the equitable consideration and sense of justice of the court. Justice Story states the rule as follows:
“It is important to take notice of a distinction between the case of a plaintiff seeking a specific performance in equity, and the case of a defendant resisting such performance. ¥e have already seen that the specific execution of a contract in equity is a matter, not of absolute right in the party, but of sound discretion in the court. Hence it requires a much less strength of case on the part of the defendant to resist a bill to perform a contract than it doe3 on the part of a plaintiff to maintain a bill to enforce a specific performance. When the court simply refuses to enforce the specific performance of a contract, it leaves the party to his remedy at law. * * * But courts of equity do not stop here, for they will let in the defendant to defend himself by evidence to resist a decree where the plaintiff would not always be permitted to establish his case by the like evidence. For instance, courts of equity will allow the defendant to show that by fraud, accident, or mistake the thing bought is different from what he intended, or that material terms have been omitted in the agreement, or that there has' been a variation of it by parol. ”
Again, in Bigelow on Fraud, 890, it is said:
“Specific performance of an agreement is never compelled unless the case is free from the imputation of all deception. * * * The conduct of the person seeking it must be free from all blame. Misrepresentation, even as to a small part of the subject, will exclude him from relief in equity. ”
And again, at page 394, be says:
“There is a distinction between the exercise of jurisdiction for setting aside a contract and refusing execution. Equity will not carry hard or unreasonable bargains into execution. * * * The power of awarding specific execution * * * rests in sound judicial discretion, and will not be applied to cases that are hard, or unfair, or unreasonable, or founded upon a very inadequate consideration. The ease may therefore be such that equity will neither decree execution for the one party, nor set aside the contract for the other. In such eases the contract stands, and the parties must look to the courts of law for its enforcement or for defense. ”
Again, in 3 Pars. Cont. *414, it is said:
“Equity will not enforce a contract tainted with fraud on the part of the applicant. * * * Here equity can hardly be said to follow the law, because it goes further, for it requires perfect good faith, and will refuse specific performance of a contract if it were obtained by means of misrepresentation or misdirection, which would not be sufficient to avoid the contract at law. * * * A much stronger case is necessary to set aside an executed agreement on the ground of misrepresentation or concealment than is sufficient to induce a court of equity to refuse a specific performance of one that is ex-ecutory. Indeed, as equity is never bound to give this relief, so it never will,*885 unless the justice of the case, as drawn from all its facts, demands it. Heneo there must not only be an entire absence of fraud, but an equal absence of oppressiveness, and if a decree would operate more hardly than it should on the defendant, this would be sufficient reason for withholding it. ”
This rule cited from the text-books is abundantly supported by the adjudged cases. Race v. Weston, 86 Ill. 94; Frisby v. Ballance, 4 Scam. 299; Mortlock v. Buller, 10 Ves 292; Willan v. Willan. 16 Ves. 83; Joynes v. Statham, 3 Atk. 388.
We think there can bo no doubt that this contract, if enforced according to its letter and spirit, would act oppressively and unjustly upon this defendant. He is a competing manufacturer in the same field with the complainant. Ho is the owner of patents which the complainant has acquiesced in bis right to use in conducting his business, and covering many, if not all, the features in his machines enumerated in the ninth article of the contract; a.nd we cannot but look upon this article and the other provisions of the contract, as a cunning device to bind this defendant, not only in a manner which he did not comprehend or understand at the time he executed the agreement, but also in a manner which would bo contrary to public policy; as wo think the courts should certainly not favor any efforts on the part of patentees or owners of patents to obtain by indirection or subterfuge an admission as to the validity of their patents which ties the hands and cripples the energies of a competitor. Many of these patents held by complainant, and perhaps all of them, may be valid for their specific devices, but the law should not encourage parties holding such patents to invent or devise schemes by which to obtain admissions, directly or indirectly, of the validity of their patents, so as to foreclose investigation and discussion upon the question of their validity; and hence we simply say that this contract seems to bo so oppressive, and so unjust and inequitable in its terms, and so contrary to sound public policy, that it ought not to be enforced in a court of equity, oven if the defendant fully understood and comprehended the force and import of every paragraph of it.
The bill is therefore dismissed for want of equity.
