Angier v. Eaton, Cole & Burnham Co.

Mr. Justice Stekrett delivered the opinion of the court, The general inquiries, suggested by the assignments of error in this case, are, whether there was any question of fact that should have been submitted to the jury; and, if not, whether, upon the facts established by the uneontradicted evidence, the defendant was entitled to a verdict. Both of these questions will be more readily answered by briefly noticing some of the more prominent facts disclosed by the testimony. By assignment from the patentee the parties to this suit became joint owners of certain letters patent, issued October 11th 1864 to Frederick Orocker for an “ Improvement in Lifting Pumps,” better known in the oil producing business as the “ Crocker check valve;” and, on March 11th 1876, they entered into a written agreement by which the plaintiff granted to the de [598] fendant company “ the exclusive right and privilege to manufacture and sell tlie ‘ Crocker check valve,’ a patented invention.” In consideration thereof the defendant agreed to manufacture the “■ valves in sufficient quantity to supply the demand therefor to render an account sales monthly and' pay the plaintiff $2.50 for each valve sold. The defendant accounted and paid for all valves manufactured and sold prior to September 1870, at which time it was formally notified that by the manufacture and sale of the valves it was infringing letters patent issued to James Old, February 18th 1862, more than two years prior to tlie date of the Crocker patent. Tlie plaintiff was thereupon informed of this fact and further payment of royalty was refused. In November 1870, a bill in equity was tiled by James Old, in the Circuit Court of the United States for the Western District of Pennsylvania, against the defendants, charging the infringement of his patent and praying for assessment of damages, &c. This suit was discontinued in January 1879, after the defendants had been subjected to great outlay in defending the same. The present action was brought on the contract, in July 1878, to recover the stipulated royalty on 1201 valves which the defendant manufactured and sold from September 1876 to date of suit. The substance of the defence, as shown by the pleadings, was that tlie consideration, for which tlie company agreed to to pay the royalty in question, had wholly failed; that the supposed patent under and by virtue of which it was to have and enjoy “ the exclusive right and privilege to manufacture and sell the Crocker check valve,” was invalid by reason of the prior patent for a new invention precisely the same, in principle, in mode of operation and in tlie results produced, as that covered by the Crocker patent; that check valves, identically the same, and used for the same purposes as those made and sold 'by tlie defendant under the contract in suit, were manufactured and sold by licensees of James Old, tlie original patentee; that neither defendant nor plaintiff could prevent said licensees from manufacturing and selling the valves; that the competition thus existing in tlie market required defendant to reduce the price of the valves, and in consequence thereof its profits were several thousand dollars less than they would have been if it bad enjoyed the exclusive right and privilege contemplated by the contract. These and other allegations on which the defence was based were clearly proved by testimony that was neither contradicted nor in any manner impeached. The learned judge, after reciting the facts thus established, instructed the jury to find for the defendant. In this it is claimed by the plaintiff that there was error. It is very evident from an examination of the respective let- ' ters patent that in every essential particular the “ Crocker cheek [599] valve” i'. the same mechanical device that is described in and covered by 1he patent previously granted to James Oid ; and hence the court was right in thus construing these instruments of evidence. There is nothing in the verbal testimony that conflicts therewith ; on the contrary, the testimony of the experts is in full accord with the views expressed by the court. Eor is there anything in the defendant’s answer in the equity suit that would justify any other conclusion. So far as the substantial identity of the valves is concerned, the evidence was all one way, and there was no question of fact for the jury to pass upon. There was really no dispute as to any of the material facts which the court treated as having been established by uncontradicted evidence. It is true the court might have submitted the testimony to tiie jury, but under the circumstances there was no error in not doing so. As was said by Woodward, C. J., in Eister v. Paul, 4 P. F. Smith 196, “where the evidence is all one way, and is so satisfactory that a court would not sustain a verdict that should find against it, we will not reverse the judgment because the judge declared the true effect of the evidence instead of submitting it to the jury.” There was no error therefore in practically ruling that there was no disputed question of fact for the jury to determine. The next question is whether the court erred in holding, as matter of law, that upon the facts established by undisputed evidence the defendant was entitled to a verdict. It cannot be doubted that the sole consideration for defendant’s agreement to pay $2.50 for each valve manufactured and sold, was “ the exclusive right and privilege to manufacture and sell.” That right was in the nature of a monopoly, and so long as it was enjoyed the defendant was bound to pay and did ¡jay 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, without any fault of the defendant, why should it be compelled to pay the stipulated royalty ? When the agreement was executed the Crocker patent was no doubt regarded, at least by the company, as valid; and therefore sufficient to protect it in the enjoyment of the exclusive right intended to be secured by the contract. Whatever knowledge to the contrary the plaintiff may have had, he evidently assumed, in bargaining with the defendant, that the valve was a patented invention, covered and protected by the Crocker patent; and, in consideration of the royalty, he expressly granted the exclusive right therein specified. In its legal effect the agreement is a license to manufacture and sell the valves, but it is of such an exclusive character as practically to amount to a monopoly; and, while it was enjoyed as such, the invalidity of the patent, without more, was no defense to the [600] payment of the royalty. 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 defence the actual invalidity of the patent; but when, in addition to the invalidity of the patent, by reason of a prior outstanding patent for the same invention, it is shown that the owner of the prior patent is asserting his exclusive rights thereunder by supplying the market with the patented article, forbidding’ all interference on the part of others, &c., and the licensee under the invalid patent is deprived of the enjoymentof the monopoly for which he contracted and in consideration of which he agreed to pay the royalty, he may defend on the ground of the actual failure of the consideration : Marston v. Swett, 82 N. Y. Rep. 527. That was a suit by a patentee against his licensee to recover royalty, in which the defense was failure of consideration ; and the court say, “ the substantial consideration to uphold these royalties was the transfer to defendants of a monopoly, the right to an exclusive use, and we see at once that the evidence offered tended to show the total failure of that consideration.” . . . . “It is impossible not to see that if the plaintiff’s theory should prevail these defendants might be liable at one and the same time to pay royalties to the plaintiff, who had no patent, and to Goodfellow, who had. The injustice of such a result makes us slow to believe that any rule of law requires us to sustain it.” This observation applies with equal force to the case before us. It follows from what has been said that there was no error in directing a verdict for the defendant. Judgment affirmed.