Hubbard v. Allen

OPINION,

Mr. Justice Sterrett :

This suit, against the survivors of Hubbard, Lippincott, Bakewell '& Co., was brought to recover royalties alleged to have accrued under their agreement with George Palmer of September 2, 1871. The origin and substance of that agreement are as follows: On August 22, 1871, letters patent of the United States were issued to Charles W. Hubbard, of the firm defendants below, and George Palmer, plaintiff’s intestate, “ for a new and useful improvement in the manufacture of axes.” On September 2d following, the patentees assigned their interest in the patent to the firm, and on the same day, and as part of same transaction, the agreement in suit was executed. After reciting the issuance of the letters patent to Hubbard and Palmer “ for an improvement in the method of manufacturing axes,” and the assignment by them to the firm, the agreement provides that, in consideration of the assignment, etc., the firm “ will keep a true and correct account of all axes and hatchets manufactured by them by the process described and claimed in said letters patent, and shall, on the first day of July and January in each and every year, during the term of said letters, .... render unto said party of the first part (Palmer) a true and correct statement of the number of axes and hatchets so as aforesaid manufactured by them by the process aforesaid, and at the same time shall pay unto the said party of the first part the sum of one cent, as royalty, on every axe and hatchet so as aforesaid manufactured by them since the last preceding statement and payment.”

Doubtless the purpose of the firm in procuring the assignment was to secure to themselves a monopoly of the patent. Hubbard, being one of the patentees and a member of the firm, had a right, of course, to use the patent in the partnership business of manufacturing axes, etc., but Palmer also, as copatentee, had a like right to use it or license others to do so. Hence it was necessary for the firm to procure the assignment in order that they might enjoy a monopoly in the use and control of the patent. But, it matters little what their purpose was. Palmer disposed of a valuable right, and the only consideration he received or was to receive therefor was the royalty which the firm agreed to pay. They refused to pay anything, and several years after the agreement was executed, a bill was filed by the personal representative of Palmer, praying for an account, etc. That suit was so proceeded in, that in November, 1880, it was finally decreed by this court that the firm of Hubbard, Lippincott, Bakewell & Co. pay to said personal representative $5,482.45, arrears of royalty accrued before the bill was filed: Palmer’s App., 96 Pa. 106.' That case involved substantially the same general questions that are presented in this contention.

The claim, in the case at1 bar, is for royalties accrued after former suit was commenced. As to a considerable portion thereof the statute of limitations was successfully interposed. The residue of the claim was resisted mainly on two grounds : 1st. Want of jurisdiction in the state courts, in that the cause of action arises under the patent laws of the United States, and is therefore originally cognizable in the Circuit Court thereof. 2d. That under a proper construction of the agreement no royalties ever accrued. It was agreed, however, that if the plaintiff was entitled to a verdict, the amount thereof should be 116,750.80.

The question of jurisdiction in lite cases has been frequently before the United States courts, and, as we understand the decisions, those courts have uniformly declined to assume jurisdiction of suits between residents of same state, founded on contracts relating to the use of patents. In Hartell v. Tilghman, 99 U. S. 547, the earlier cases were reviewed by Mr. Justice Miller. One of these, Wilson v. Sandford, 10 How. 99, was a suit for infringement, brought by the assignee of a patent against a party who had taken a license from the owner and failed to pay the consideration. The court said: “ The peculiar privilege given to this class of cases was intended to secure uniformity of decision in the construction of the acts of congress in relation to patents. The dispute in this case does not arise under any act of congress, nor does the decision depend on the construction of any law in relation to patents. It arises out of the contract stated in the bill, and there is no act of congress providing for or regulating contracts of this kind. The rights of'the parties depend altogether upon common law and equity principles.5’

In a later case, Albright v. Teas, 106 U. S. 613, between citizens of the same state, brought in a court thereof for moneys alleged to be due to the complainant under a contract whereby certain letters patent, granted to him, were transferred to the defendants, it was held that the suit, not involving the validity or the construction of the patent, is not one arising under a law of the United States, and cannot be removed to the Circuit Court. “It is clear,” said Mr. Justice Woods, “from an inspection of the bill and answers, that the case is founded upon the agreement in writing between the appellee and the appellants, Albright and Cahoone, by which the former, for the consideration therein specified, transferred to the latter his interest in certain letters patent. The suit was brought to recover the consideration for the transfer and was not based on the letters patent.The only question raised by the bill and answer was simply this : What is the sum due the appellee from Albright and Cahoone, for his royalties under the contract ? In ascertaining this amount, it, of course, became necessary to inquire what goods were manufactured by the appellants under the patent of the appellees* In prosecuting this inquiry an incidental question might arise, namely, What goods were manufactured by appellants under other patents of which they were the owners or licensees ? But this incidental and collateral inquiry does not change the nature of the litigation. The fact that Albright and Cahoone had licenses to use the other patents under which they were manufacturing goods, does not give them the right to litigate their cause in the United States courts, because certain goods which they asserted were made under the other patents, the appellee asserted were really made under his. The suit, notwithstanding the collateral inquiry, still remains a suit on the contract to recover royalties, and not a suit upon the letters patent. It arises solely upon the contract and not upon the patent laws of the United States. We are therefore of opinion that, even if we go outside of the pleadings and look into the testimony, the case is not one arising under the laws of the United States, and consequently the courts of the United States had no jurisdiction.”

Other cases might be cited, showing the United States courts have uniformly held that an action between residents of same state, on a contract to pay royalties for the use of a patented invention, is within the exclusive jurisdiction of the state courts, but those referred to, at some length, are sufficient.

In Slemmer’s App., 58 Pa. 155, the question was considered by this court. After referring to the cases, Mr. Justice SharsWOOD there said: “ The result of the authorities then appears to be that the state courts are competent, either at law or in equity, to enforce a contract or a trust of which a patent right is the subject matter, where the validity of the patent is not directly in question, and even to pass upon that when it arises ex necessitate, as by way of defence in an action on a contract.”

Dale Tile Manufacturing Company v. Hyatt, 125 U. S. 46, cited by plaintiffs in error, is not in conflict, but rather in harmony with the cases above referred to, and also with Felix v. Schwarnweber, the next case in same volume.

Without further consideration of the question, we are satisfied tbe court below bad .jurisdiction of tbe ease. Tbe suit is on tbe contract to account and pay a stipulated royalty. There is no question as to tbe validity of tbe patent or tbe right of plaintiffs in error to its exclusive use. The only question is that involved in tbe second ground of defence, viz.: On a proper construction of tbe agreement, are tbe defendants indebted for royalties, and, if so, how much ?

Tbe agreement, as we have seen, is to keep and render every six months “ a true and correct account of all axes and hatchets manufactured by them by tbe process described and claimed in said letters patent,” and pay, as royalty, “ one cent on every axe and hatchet,” etc.

The extent of liability, if liable at all, being admitted, tbe only question of fact submitted to1 tbe jury was, whether certain dies were used for tbe purpose of welding as 'well as shaping tbe polls of tbe axes and hatchets. In submitting tibht question tbe learned judge, following our ruling in tbe former case, instructed tbe jury that if tbe dies were used only for tbe purpose of shaping tbe poll of tbe axes, defendants were not bable ; but if they were used for welding as well as shaping, then defendants were liable. Tbe verdict was thus madp to depend solely on tbe determination of that question of fact, and it was found in favor of plaintiff below, thus determining the fact that tbe dies in question were used by defendants for both shaping and welding.

Tbe contention is that this was not manufacturing “by tbe process described and claimed in said letters patent; ” that it was using only one step in that process, and cannot, according to- tbe true intent and meaning of the'contract, be regarded as. manufacturing by tbe process. In other words, there can be no manufacturing “by tbe process ” unless each and every step in tbe process is employed. We do not think so. As was said in tbe former case, defendants below might not find it convenient or advantageous to use all tbe mechanical devices covered by tbe patent; but, according to what must be regarded as tbe true interpretation of tbe contract, tbe employment of one or more of them was a manufacturing “by tbe process described and claimed in tbe letters patent.” Tbe word “process,” as used in tbe agreement in suit, was not employed in tbe restricted technical meaning that it has acquired in the patent law when used in speaking of patented processes, etc. As distinguishable from the mechanical devices described and claimed in the letters patent, there is no patentable process described therein. .The patentees themselves did not represent that they had invented any new process which, in and of itself, was the subject matter of a patent; but that they had “invented a new and useful improvement in the manufacture of axes,” and, proceeding to explain the “construction” thereof, they describe three distinct sets of dies by referring to the drawings attached to the specifications. It thus appears from the claim and specifications that the invention covered by the letters patent relates not to a patentable “process,” but solely to mechanical devices. The invention consists wholly in the mechanical devices embodied in the dies. Each separate set of dies is a patented invention, so far at least that the unlicensed use thereof would undoubtedly subject the party using the same to an action for infringement of the patent. The plaintiffs in error themselves would doubtless so regard it, if any one should attempt to use the pair of dies which constitute the second item of claim covered by the patent of which they are the assignees. Nothing is better settled in practice than that the unlicensed use of either of several mechanical devices embraced in the claim of a patented invention, is an infringement of the patent; and it ought to be regarded as equally clear that a licensee or assignee of a patent containing several distinct items of claim, is liable for the stipulated royalty, if he use the invention covered by any one of those items, unless his liability is clearly and distinctly limited.

The jury having found that plaintiffs in error used the set of dies above referred to for the purpose of both welding and shaping axe polls, we are of opinion that, upon any proper construction of the contract in suit, plaintiff below was entitled to recover for so much of his claim for royalties as was not barred by the statute of limitations.

It is unnecessary to refer specially to either of the assignments of error. Sufficient has already been said to show that there was no error in the answers of the court to defendants’ 5th, 6th, 7th, 8th, 11th, 12th, 18th, and 14th points, recited in the first nine specifications.

The 10th specification, embracing part of the charge in which reference is made to the question of fact submitted to the jury, etc., is not sustained.

There was no error in rejecting defendants’ offers of evidence referred to in the 11th and 12th specifications, nor in admitting the evidence complained of in the 13th and last specification.

Judgment affirmed.