American Graphophone Co. v. Pickard

HAZEL, District Judge. [1] The denial at the hearing of a preliminary injunction to the complainant proceeded on what I now think was an erroneous assumption that the suit was based solely on contract and was not strictly an action arising under the patent laws. If this assumption were correct, the earlier decision would doubtless have been necessary under section 720 of the Revised Statutes, which forbids federal courts to stay proceedings of a state court of concurrent jurisdiction. But a closer examination of the bill shows that the gravamen is the indirect infringement. of complainant’s .patents by the breach of the conditions upon which the patented articles were to be sold. The question then arises as to whether the threatened violation by the defendant of the contract containing restrictions as to the selling price constitutes contributory infringement. The Supreme Court of the United States, in Henry v. Dick Co., 224 U. S. 1, 32 Sup. Ct. 364, 56 L. Ed. 645, has set this precise question at rest. There it was expressly held that an action which raises a question of infringement is an action arising under the patent law [548] and may be instituted in the District Court, even though the construction relating to the contract is also involved. Nor is it sufficient to bar an action in the District.Court that in general the rule of comity requires that this court should not enjoin the sale of property in the possession of the state court. In the present case effect must be given to the nature of the action and the relief sought, a relief which the federal courts alone can grant. Hupfeld v. Automaton Piano Co. (C. C.) 66 Fed. 788. [2] It appears herein not only that the patented articles were bought from complainant by the Hill Piano Company subject to terms and conditions relating to the selling price, but also that notice thereof, together with notice that the articles were covered by complainant’s patents, was brought home to the defendant assignee before this action was instituted. Under such circumstances the defendant assignee could not by the assignment to himself for the benefit of creditors secure any greater right to sell the patented articles than had his assignor, i. e., a license subject to price restrictions. Oliver et al. v. Rumford Chem. Co., 109 U. S. 75, 3 Sup. Ct. 61, 27 L. Ed. 862; York Mfg. Co. v. Cassell; 201 U. S. 345, 26 Sup. Ct. 481, 50 L. Ed. 782; Thompson v. Fairbanks, 196 U. S. 516, 25 Sup. Ct. 306, 49 L. Ed. 577; United Wireless Tele. Co. v. National Electric Signaling Co. (C .C. A.) 198 Fed. 385. In the latter case it is held that, where a defendant has infringed a patent and is subsequently adjudged a bankrupt, thq court has power to enjoin the sale by the trustee in bankruptcy of the infringing apparatus. By analogy this principle applies to this case. Next, it is contended by the defendant that the complainant violated its contract conferring upon the assignee exclusive right to sell the patented articles within a specified locality. It is argued that, if the defendant had remained the sole salesman, the selling price fixed by the maintenance contract would have been obtainable from intending buyers; but said contract does not, I think, bear out the claim of exclusive territorial agency and was terminable by the complainant. At any rate, it appears that only after the assignment by the Hill Piano Company, which has since been adjudicated bankrupt, did the complainant designate another selling agent. This, in my opinion, is insufficient to require a denial of the injunctive relief prayed for, and therefore the injunction may now issue.