Marsh v. Harris Manufacturing Co. , 63 Wis. 276 ( 1885 )

The following opinion was filed March 3, 1885:

Cole, C. J.

According to our understanding of the complaint, the agreement dated December 24, 1875, continued in force, in a modified form, the prior agreement of September, 26, 1870.. This, we think, is obvious from these clauses in the former instrument: “ (1) That said Marsh would license and confer the right and privilege upon the Harris Manufacturing Gom/pcim/ of making, using, and vending to others to be used, each, every, and all the improvements which are secured by the letters patent mentioned in said Exhibit B, within any and all of the United States and the territories thereof, for and during the full end and term of said several patents, and upon the terms cmd conditions therein. mentioned, except,” etc. Again, it is recited that the plaintiff, for the purpose of carrying out and reducing to writing the verbal agreement made prior to the release and cancellation mentioned, “ does hereby license and confer the right and privilege upon the Harris Manufacturing Company of making, using, and vending to others to be used, each, every, and all of the improvements which are secured by the letters .patent mentioned in said Exhibit B, and for any and all improvement or improvements which have been or may he made to or upon any of said patents, or any patent or patents which said Ma/rsh has since obtained, or may have or own, for any improvement or improvements in combined rakes and reels which is not secured by any of the patents above referred to; and this license shall be deemed to extend to all such improvements, and relate hack to the time of said release and cancellation, and be deemed a eon-ti/nuation of said license, Exhibit JB, in the name of and from said ” plaintiff, etc. These clauses show that the parties intended to keep alive and incorporate into their new agreement the provisions of Exhibit B, so far as those provisions were applicable to their altered circumstances or changed relation. We do not think Exhibit B was ever extinguished by any cancellation, so far as the parties to this suit were concerned. It was modified in many essential parts, but not destroyed. There is nothing in any of the exhibits which will fairly sustain such a contention. Therefore, Exhibit B must be regarded when we seek to determine the rights and liabilities of the parties.

In the third answer, as it is called, the defendant alleges, in substance, (1) a settlement and payment of all royalties and license fees due the plaintiff for or on account of reapers manufactured or sold by it, or through its procurement, prior to February 22, 18^8; (2) that it has not, since February 21, 18Y8, manufactured or sold any reapers or revolving raking apparatus under or in pursuance of the contracts mentioned in the complaint, and that it did, on that day, give the plaintiff personal notice that it would not thereafter manufacture or sell any reaper or reaping-machines under or in pursuance of said contracts, or either of them; and (3) that the plaintiff’s patents are void. The plaintiff did not, and, of course, could not well, demur to this answer so far as it related to the settlement and payment of royalties and license fees. But he did demur to the rest of the answer. As the answer was framed, this was the only-course open to him, if he wished to raise the question as to the sufficiency of that part of the answer. The demurrer will therefore be deemed regular and proper to raise that question.

It .appears to us that the matters stated in this answer do not constitute any defense to this action for royalties agreed to be jcaid. In the first place, it will be noticed that' there is no direct allegation that the defendant had ceased manufacturing and selling’ the machines and apparatus mentioned in the contracts. True, it is alleged that it has not, since the day the notice was given, manufactured or sold any reapers, etc., “under or in pursucvnoe with any of the contracts or agreements,” etc. But this is not equivalent to an averment that since February 21, 1878, it has entirely ceased to manufacture and sell these machines. It gave notice that it would not go on under the contracts. In other words, it repudiates these - contracts as not binding upon it, and will continue to manufacture and soil the machines without regard to the plaintiff’s rights under his patents. This is the position of the defendant, as we infer from the allegations in the answer. And the defendant justifies its course on the ground that the plaintiff was not the inventor or discoverer of the improvements secured by his letters patent, and that his original and reissued patents ai-e void. The plaintiff’s counsel suggests that by the contracts the defendants secured and had the benefit of other patents besides those mentioned in the third answer, and that these constitute a sufficient consideration for the agreements. Be this as it may, it is clear to us that upon the facts the defendant cannot successfully defend an action for the royalties on the ground of the invalidity of the patents. It has had the benefit of these patents, which were apparently valid. It has not been disturbed in the use of them by any one. It has not been adjudicated by any court that tliese patents were void, or that the plaintiff was not the first inventor of the improvements patented. It is fair to assume that the defendant is manufacturing and putting upon the market these very patented machines, and that it is receiving and enjoying all the benefits of the patents which it contracted for. .What justice or equity is there in its claim that it should he relieved from the payment of the royalties? We certainly can see none, and the authorities upon the question do not support the claim.

The cases cited upon the brief of plaintiff’s counsel are distinct and conclusive upon this point. The English cases appear steadily to resist all attempts of licensees, under patents apparently valid, to raise the question of their invalidity in an action- for the royalty. The decisions in this .country are in substantial accord with that view. Judge Einoh, in Marston v. Swett, 82 N. Y. 526-533, thus states the rule: “ Where the patent is apparently valid and in force, the party using it, receiving the benefit of its supposed validity, is liable fon royalties agreed to be paid, and cannot set up as á defense the actual invalidity of the patent. The reasons for the rule' are that the party has got what he bargained for; that he cannot be allowed at the same time to affirm and disaffirm the patent; and that he cannot in this way force the patentee into a defense of his right, and compel him to try it in a collateral action. While the manufacture goes on under an apparently valid patent, it is presumed to be under and in accordance with the ' agreement to pay royalties. If the manufacturer doss not so intend, and chooses to make the patented article, not under the patent, but in hostility to it, he must give notice of that intention, in order that the presumption may not attach or the patentee be misled.” That was an action by an assignee for royalties. It was proposed to show as a defense that the patent-office had annulled the patent because the plaintiff’s assignor was not the original inventor, and had awarded a patent to another. This was held to be a good defense for all royalties accruing after the date of the patent-office decision.

But in the present case it does not appear that the plaintiff’s patents have ever been judicially avoided by any tribunal. Besides, in the contract the defendant acknowledged the validity of the plaintiff’s patents, and agreed not to dispute the same, or set up any defense against their validity in any action upon or controversy arising out of the license, or any of the agreements therein, or upon any note or obligation given in consideration of or upon settlement of patent fees accruing thereunder. Here is a clear and direct admission of the validity of the patents, and an agreement not to question their validity. The rule is well settled that in a suit upon a license or contract which, contains a covenant on the part of the licensee by which the validity of the patent is admitted, and the licensee has had the benefit of the license, that he is estopped to deny the validity of the patent by setting up anything contrary to the admissions in his contract. Many cases in support of this rule will be found on the brief of plaintiff’s counsel. The learned counsel for the defendant questions the soundness of the principles upon which, these decisions rest, but we are disposed to regard them as correct exjaositions of the law upon this question.

It results from these views that the facts stated in the third answer constituted no defense, and the demurrer to it was improperly overruled.

By the Court.— The order of the circuit court is reversed, and the cause is remanded for further proceedings according to law.

Cassoday, J., took no part.

A motion for a rehearing was denied June 1, 1885.