Edison General Electric Co. v. Thackara Manufacturing Co. , 167 Pa. 530 ( 1895 )

Opinion by

Me. Justice Mitchell,

The plaintiffs’ case comes before us in an exceedingly unfavorable light, from the apparent recklessness with which facts are sworn to which they should have known to be untrue. Plaintiffs in their statement “ aver that there is justly due to them by defendants the sums of $571.43 with interest from October 1, 1891; $571.43 with interest from January 1, 1892; $571.43 with interest from April 1,1892,” and four other similar quarterly sums with interest from later dates, and this statement is sworn to. The affidavit of defense avers explicitly that the defendant “ has paid plaintiffs in full by check which was duly paid, for all royalties due up to the first day of April, 1892, and has plaintiffs’ receipt therefor ” and plaintiffs have apparently conceded the truth of this defense by taking judgment for the later sums only. Such looseness is not to be commended. When the procedure act of Majr 25, 1887, P. L. 271, substituted “ a concise statement of the plaintiff’s demand ” for a common law declaration, and the rule of the court below required the statement to be sworn to, and, where damages are capable of liquidation, to contain “ an explicit averment of the amount claimed to be justly due,” these matters ceased to be merely formal and became substantial with a resulting necessity to follow the truth of the actual facts.

This judgment must be reversed for the variance between the averment and the assessment of damages. The statement sets out that there is due under the agreement sued on “ three per centum of the net wholesale selling price of the fixtures, etc., manufactured and sold' by defendants,” etc., and that plaintiffs are “ unable to state the exact amount of royalties due .... but believe that the net wholesale selling price . . . . of the devices covered by the patents made and sold during each of these seven periods, amounts to $4,000 and upwards, and plaintiffs therefore claim to recover on this account the sum of $571.43 with interest “ from each of the seven quarterly periods named.” The amount claimed is certainly not three per cent of the alleged selling price, but more than four times that much, and the principle upon which such result was reached nowhere appears. But plaintiffs upon the rule being made absolute for judgment, abandoning as already said the first three items of their claim, assessed the damages on the other four at the full sums claimed with interest. There is nothing on the record to sustain such an assessment.

Coming now to the substantial matters of defense to the whole claim, the affidavit avers that defendant has paid all royalties due up to April 1, 1892, and has not since that date incurred any liability for rojralties or manufactured any of the articles named in the agreement except electric light fixtures claimed to be covered by patents Nos. 259,235 and 294,697, and as to these that the said patents are wholly void and invalid, and defendant has refused to pay royalty, repudiated the license, and manufactured in hostility thereto. And further that there has been a failure of consideration, in that the agreement was made on the inducement at the time of signing that plaintiffs would prevent all other parties not members of the Gas and Electric Fixtures Association (of which defendant covenanted that it was and should continue a member) from manufacturing or selling the articles named and that plaintiffs have not done so, but that said articles are made and sold by other parties named, not members of the said association and not paying royalty, and thereby defendant has been unable to compete in its business with such others selling without the payment of royalty. The merits of such a defense by a licensee have been settled by this court in Angier v. Eaton, Cole & Burnham Co., 98 Pa. 594, where it was said by the present chief justice, “ the right was in the nature of a monopoly and so long as it was enjoyed the defendant was bound to pay the ^.consideration therefor; but when by reason of something beyond the company’s control it was deprived of that exclusive right, in other words when the consideration failed, why should it be compelled to pay ? . . . . The recognized principle applicable to such licenses is that while the patent is apparently valid, and the licensee is enjoying the benefit of its supposed validity, he is bound to pay the stipulated royalty, and cannot set up as a defense the actual invalidity of the patent; but when in addition to the invalidity of the patent by reason of a prior outstanding patent, it is shown that the owner of the prior patent is asserting his exclusive rights thereunder by supplying the market with the patented article, and the licensee under the invalid patent is deprived of the monopoly for which he contracted, and in consideration of which he agreed to pay the royalty, he may defend on the ground of actual failure of the consideration.” In the present ease the monopoly is not exclusive in the defendant, but was to be enjoyed with others who were also members of the association, and who also paid royalty. The difference is one of degree only, not of principle.

Subsequent cases have not disturbed these well settled principles. In Hardwick v. Galbraith, 147 Pa. 333, it was held that a license does not of itself import a monopoly, but in the present case it is expressly set up in the affidavit that there was to be a monopoly among the members of the association, all of whom paid royalty. In Jarecki Co. v. Hays, 161 Pa. 613, the pith of the decision, p. 617, is that a licensee receiving the benefits must pay the fees without regard to the validity of the patent; and in Hardwick v. Galbraith, supra, and Patterson’s Appeal, 99 Pa. 521, it was held that the licensees could not set up the invalidity of the patent as a defense because they had agreed that the test on that point should be an adverse decision by a court of competent jurisdiction. All these cases are in entire harmony with Angier v. Eaton Co., supra.

The defendant was entitled to go to a jury on the defense set up in his affidavit.

Judgment reversed and procedendo awarded.