Victor Talking Mach. Co. v. Fair

BAKER, Circuit Judge (after stating the facts as above), i. Concerning jurisdiction: When a contract is made respecting a right under a patent, and the parties get into litigation, confusion has sometimes arisen over the question whether the cause of action originatesjn the contract or in the patent laws. The test is this: If the plaintiff is seeking a judgment for debt or damages, or a decree for cancellation or specific performance, on account of the defendant’s breach of his covenants, the cause of action arises out of the contract; and, though the determination of the issue of breach or no breach may involve the interpretation of the patent and of the prior art, the insistence of the defendant that his device, according to the true construction of the patent and of the prior art, is not within the patent right granted him in the contract, cannot change the nature of the action. Standard Sewing Machine Co. v. Leslie, 118 Fed. 557, 55 C. C. A. 323. On the other hand, if the plaintiff is seeking a judgment for damages, or a decree for an injunction and an acounting, on acount of the defendant’s unauthorized use of the patent right in making or using or selling the device without license, the cause of action arises out of the patent laws; and, though the determination of the issue of infringement or no infringement may involve the interpretation of the contract, the insistence of the defendant that his act was within his rights-under the contract, if properly construed, cannot change the nature of the action. We think the rule as stated is clearly deducible from the authorities. Mr. Chief Justice Taney’s statement of the nature of the bill in Wilson v. Sanford, 10 How. 99, 13 L. Ed. 344, points out the class to which that action belongs: “The object of the bill is to have this contract set aside and declared to be forfeited; and the prayer is ‘that the appellant’s re-investiture of title to the license granted to the appellees, by reason of the forfeiture of the contract, may be sanctioned by the court,’ and for an injunction. But the injunction he asks for is to be the consequence of the decree of the court sanctioning the-forfeiture. He alleges no ground for an injunction unless the contract is set aside.” If, however, the patentee had been suing,- not to have the contract annulled, but to restrain the defendants from using a part of his monopoly that had never been granted them, the language of Mr. Chief Justice Waite in Littlefield v. Perry, 21 Wall. 205, 222, 22 L. Ed. 577,. would characterize the class: [426] .“An action which raises a question of infringement is an action arising ‘under the law,’ and one who has the right to sue for infringement may sue in the Circuit Court. Such a suit may involve the construction of the contract as well as the patent, hut that will not oust the court of its jurisdiction.” And in this connection, see, further, Excelsior Wooden Pipe Co. v. Pacific Bridge Co., 185 U. S. 282, 22 Sup. Ct. 681, 46 L. Ed. 9x0; Atherton Machine Co. v. Atwood-Morrison Co., 102 Fed. 949, 43 C. C. A. 72; Ball & Socket Fastener Co. v. Ball Glove Fastening Co., 58 Fed. 818, 7 C. C. A. 498; Seibert Cylinder Oil Cup Co. v. Manning (C. C.) 32 Fed. 625. In the present case it is hardly conceivable that the question of jurisdiction would have been broached if appellants had confined themselves to drafting and filing a straight bill for infringement. But again, the defense, whether put in by the defendant or by the plaintiff for him, cannot change the nature of the action. 2. The merits: Without applying to the Patent Office, one may. make and use and sell the device that embodies his invention. That is his natural right. All that the government can and does grant him is the right to exclude others from practicing his invention without his consent. Within his domain, the patentee is czar. The people must take the invention on the terms he dictates or let it alone for 17 years. This is a necessity from the nature of the grant. Cries of restraint of trade and impairment of the freedom of sales are unavailing, because for the promotion of the useful arts the constitution and statutes authorize this very monopoly. By its terms, the grant covers three separate or separable fields. The patentee may agree with one that he will not exclude him from making, with another from using, and with yet another from selling devices that exemplify the principles of his invention. Within the field of making, it has never been doubted, so far as we are aware, that he may subdivide as he pleases and offer to sell or lease in the most fanciful parcels on the harshest terms; that whether purchasers and tenants come or not is purely his own concern; and that, if purchasers or tenants do come, the courts will enforce the terms of the sale or lease. And how could it be otherwise? Owning the whole, he owns every part. The field being his property, and there being no law for seizing it and adjudging his damages, he cannot be compelled to part with his own except on inducements to his liking. The same conditions must prevail within the field of use, for how can it be distinguished? And the Circuit Court of Appeals for the Sixth Circuit, in a case we thoroughly approve (Heaton-Peninsular Button Fastener Co. v. Eureka Specialty Co., 77 Fed. 288, 25 C. C. A. 267, 35 L. R. A. 728), has ruled that a patentee may farm out such a part of the field o'f use as he pleases and retain the balance, and that whoever without permission enters the reserved portion is an infringer. This case has been followed and approved by the Circuit Court of Appeals for the Second Circuit in Cortelyou v. Lowe, 111 Fed. 1005, 49 C. C. A. 671. The field of sale is as much within the monopoly as the others, and so it has been decided. Bement v. National Harrow Co., 186. U. S. 70, 22 Sup. Ct. 747, 46 L. Ed. 1058. And in Edison Phonograph Co. v. Kaufmann (C. C.) 105 Fed. 960, and Same v. Pike (C. C.) 116 Fed. [427] 863, the holdings were that a patentee may reserve to himself as an ungranted part of his monopoly of sale the right to fix and control the prices at which jobbers and dealers may sell the patented article to the public, and that whoever without permission enters the reserved portion is an infringer. In the present case, the vice of counsel’s argument lies in the assumption that the jobber by paying his money to appellants acquired such an unrestricted title to the machines in question that appellee could take them and fix its own prices in offering them for sale to the public. The bill very clearly shows that appellants said to the jobber: “We are unwilling to part with the whole of our monopoly. There are no terms on which we will give you an unrestricted right to deal in our machines. However, if you choose to pay our price for a limited right, we will place our machines in your hands to be sold by you or by dealers under you to the public at not less than $25 each”— and that the jobber explicitly accepted this offer. It is axiomatic in all departments of the law that unless the quality of innocence intervenes the title of the purchaser is no better than his seller’s. The bill directly charges appellee, a dealer, with prior knowledge of the terms on which the jobber came into possession of the machines. Whether or not appellee covenanted to be bound by the terms is not alleged, and whether or not an implied promise arose from appellee’s purchase is immaterial in this case, for the suit is not upon a promise to keep out of the reserved portion of the monopoly, but is for the trespass in entering without permission. It is perhaps needless to observe that what the rights of the public who purchase at $25 may be with respect to reselling is a question not involved. The decree is reversed, with the direction to overrule the demurrer to the bill.