Goshen Rubber Works v. Single Tube Automobile & Bicycle Tire Co.

SANBORN, District Judge (after stating the facts as above). If the patentee still retained an interest in the patent and the licensees’ agreement was made on sufficient consideration, the case is entirely ruled by Rubber Tire Wheel Co. v. Milwaukee Rubber Works, above cited. It is, however, sought to distinguish that case by the argument that the licenses to various manufacturers for the full term of the patent divested the patentee of any further interest, and operated to release the patented devices from the monopoly of the patent. Of course, the patentee still remains the owner. The licenses might be modified at any time by any subsequent arrangement between licensor and licensee. If the subsequent licensees’ agreement was for the benefit of the owners of the patent, then it was upon sufficient consideration, amounted to a modification of the licenses, and was in all respects a valid contract. It is familiar law that articles manufactured under the term of the patent are taken out of the limits of the.monopoly and become part of the common property of the country. When they are sold by the patentee or his licensee, the royalty having been previously paid or secured, the patentee, having once received his royalty cannot treat the seller or user as an infringer. Morgan Envelope Co. v. Albany Paper Co., 152 U. S. 425, 14 Sup. Ct. 627, 38 L. Ed. 500; National Phonograph Co. v. Schlegel, 128 Fed. 733, 64 C. C. A. 594. The licensees’ agreement, however, related entirely to tires to be manufactured in the future, upon which no royalty had been paid. The licensees’ agreement was made for the purpose of securing the payment of the royalty upon tires to be subsequently made, and the patentee had a vital interest in the character and the amount of the tires to be so manufactured. It will hardly be denied that, if at any time the licensees’ operations were unsatisfactory, the parties might by subsequent agreement modify them; or, if the operations of the licensee were so unsatisfactory and unbusinesslike as to amount to a breach of the agreement, the licensor would have the right to terminate it and make a license to another. It seems clear, therefore, that the dominion of the patentee remains for the purpose of securing a substantial performance of the agreement made by the licensee. The only right secured to the public by the licenses was to purchase the tires after they had been manufactured and [434] offered for sale. It did not obtain the right to have the competition between the different licensees continued, or in any way obtain an embargo against a modification of the licenses. The following purposes beneficial to the Single Tube Company were secured by the agreement sued on: It was enabled to ascertain the exact amount of sales of the patented tires made by each licensee; the per centum of royalties secured by the agreement was rendered certain in amount. The reputation and value of the patented tires may have been further increased by the provisions as to price and quality of tires to be made. The services of an arbitrator were secured at the sole cost of the licensees. The decision of the arbitrator was made; final, thereby preventing possible litigation between the parties. And the agreement in suit may be regarded as a written modification of the license. All of these matters are beneficial to the patentee, and form a sufficient consideration for the agreement. The judgment of the Circuit Court is affirmed.