Pharis v. Moline Plow Co.

Mr. Justice Thompson delivered the opinion of the court. There are two questions involved in this casé, first, are the' appellees entitled to have the contract reformed; second, are the appellants entitled in this action to show the invalidity of the patents involved in the contract as a defense to the accounting prayed. The evidence shows that the appellees were having the National Manure Spreaders manufactured elsewhere and sold at a considerable profit and that appellants solicited the exclusive right to make the manure spreaders under the invention of appellees and under any new devices for which appellees might obtain patents thereafter during the life of the patent; that appellees turned over to appellants, under the contract, the good will of the business, the’ exclusive right to continue to use the name “National” on the spreaders, the patterns and forms owned and used by appellees in the manufacture of the spreaders, the exclusive right to use the letters patent No. 773,505 and agreed to assign to appellants any patents concerning. spreaders thereafter obtained by appellees, and to defend at their own expense the patents and all suits brought against appellants for alleged infringement, and to prosecute infringers. It appears that the contract was prepared in typewriting with blanks to be filled in, and at the time of its execution the president of appellants drew a line through the word “patent” near the end of the contract and inserted the words “application for patent.” It is on this change that appellants contend they never understood they were to pay royalties during the life of the contract. There are numerous clauses in the contract that conclusively show the contract was to cover and extend over not only the application but also the life of the patent. The oral proof made by appellees shows conclusively that both parties understood royalties were to be paid during the life of the patent, and this proof was not denied by any evidence on the part of appellants. The appellants manufactured no spreaders under the application before the patent was issued. Under the theory of appellant, if it be true, they got the patent and all future inventions of appellees concerning the spreader, the right to use the name “National,” all the patterns and forms used by appellees in the manufacture of the spreaders, and the obligation of appellees to defend •the patents, defend suits for infringement and to prosecute infringers, for nothing during the life of the patent and yet appellants paid to appellees $20,000 in royalties under the patent during the first two and a half years after it was issued, when they say they were not required to pay anything under the contract. The letter written by appellants September 18, 1907, to appellees and signed by appellants is: “Moline Plow Company Moline, Illinois, September 18, 1907. Messes. L. A. Keene, Waterman, Illinois. Mott E. Pharis, Syracuse, N. Y. Gentlemen : We have just learned that our liability to pay you royalties on manure spreaders under our contract with you dated May 24, 1904, long since ended by the issuance of your patent, and that the contract is, and for nearly three years has been, a fully paid up one. The contract specified that royalties should be due and payable ‘only during the life of the application for letters patent of the United States No. 159,567, filed June 1, 1903. ’ This is the application on which your patent No. 773,505, of October 25, 1904, was issued. Our patent counsel advise us that an application for a patent only continues to be a live or pending application until the issuance of the patent, after which it has no life or existence as an application. It seems, therefore, that we have been paying you royalties after the expiration of the time specified in the contract. Now, however, that we have been informed of the fact —the expiration of the application specified—we must decline to pay you any further royalties under the contract or to recognize your right to any. We deem it only just to you to say that we believe that in receiving royalties that you were not entitled to that you were as ignorant of the fact as we were in paying them. Tours very respectfully, Moline Plow Company, By L. C. Blanding Asst. Secy. The Mandt" Wagon Company, By L. C. Blanding, Asst. Secy. ’ ’ This letter with the other evidence established beyond doubt that the parties mutually understood that appellants were to pay royalties during the life of the patent. Even if there were any doubt as to the intention of the parties in making the contract, the interpretation which the parties by their acts under the contract have practically given it, will have weight and may be controlling in arriving at the intention of the parties. Walker v. I. C. R. R. Co., 215 Ill. 619; Whalen v. Stephens, 193 Ill. 121; Close v. Browne, 230 Ill. 228; Street v. Chicago Wharfage & S. Co., 157 Ill. 605; Garrison v. Nute, 87 Ill. 215; Kerz v. Galena Water Co., 139 Ill. App. 598; Bishop on Contracts, sec. 412. It is evident that the appellees were entitled to a reformation of the contract. The principal question remaining relates to the action of the trial court in refusing appellants the right to set up that the patents were invalid and an infringement on patents held by other parties as a defense tó the accounting, and to secure affirmative relief from liability on the contract by the cross bill. The tenth section of the contract provides: “The said party of the first part agrees that in the event of their not being able to sustain their patents against infringements, or in the event of National Manure Spreader being found by the decision of a court of competent jurisdiction, to infringe any of the essential features of any patent or patents owned by others, the party of the second part shall be under no further obligation to pay royalties and all such payments shall cease.” By the third section appellees agreed to defend all suits brought against appellants and to pay-all expenses of such defense, and in the fourth appellees agreed to prosecute all infringers. By the agreement appellants are to pay royalties until it has been determined by a court of competent jurisdiction that appellees’ patent infringes on that of others. Appellants are continuing to manufacture the spreaders under the patent, and use the name “National.’’ They are claiming and insisting on all the benefits of the contract, and using the patterns and forms they received from appellees under the contract. So far as can be gathered from the cross bill and the parts of the answer expunged, appellants propose to retain and insist upon all rights they have under the contract and to continue to make the spreaders under the contract, but to discontinue paying royalties. Appellants as licensees of appellees are estopped to raise the question of the validity of the patents while they are receiving the benefits of the patent under the contract and the patent has not been adjudged invalid or to be an infringement on others, and the tenth clause of the contract is the .measure of appellants’ right in that regard. United States v. Harvey Steel Co., 196 U. S. 310; Rhodes v. Ashurst, 176 Ill. 351; Illinois Watch Case Co. v. Ecaubert, 177 Ill. 587; Havana Press Drill Co. v. Ashurst, 148 Ill. 115; White v. Lee, 14 Fed. R. 789; Brown v. Lapham, 27 Fed. R. 77. A party may not claim the benefits of a contract and at the same time repudiate its burdens. If appellants were not continuing to make the spreaders and were not receiving the benefits of the contract, there would be some reason in their contention that the State court had jurisdiction to consider the invalidity of the patent as a defense to the accounting, and to relieve them from its obligation. We are of the opinion that there was no error in rejecting the defense of the invalidity of the patent under the pleadings in the case and in refusing to relieve appellants from the contract. While some other questions are presented, the disposition of the principal questions disposes of the remaining questions, as it is not seriously contended that there is any error in the accounting.- Finding no error in the case the decree is affirmed. Affirmed.