Wagner Typewriter Co. v. Watkins

COXE, District Judge (after stating the facts). This record presents a legal tangle which is unique and unprecedented. To define with perfect accuracy the rights of all the parties involved in this snarl of titles is a problem the solution of which can hardly be expected of a merely finite intellect. It is thought, however, that the issues involved may be disposed of without attempting so formida-' ble a task. It is unnecessary to consider the testimony relating to the cash payments provided for by the agreement of February 20, 1894, for the reason that the complainant’s brief concedes that Wagner received a sufficient amount “to estop him from claiming that he has not been paid.” The source from which Watkins procured this money and his alleged indirection towards others in connection therewith are questions wholly immaterial to this dispute. It is enough that the licensee paid to the licensor the full amount agreed on between them. This sum being paid there can be no forfeiture under the written stipulations of the agreement. The only provision for a forfeiture has reference to a default in making these preliminary payments. As the payments were made, the clause providing that in case of nonpayment “ this agreement to be forfeited within ten days after such default” never became operative. It is said that Watkins failed to keep the agreement for the reason that he did not pay the expenses incident to the application for additional patents. This proposition cannot be maintained. It is unable to stand alone either on the facts or the law. The license only required the payment of the expenses of such patents “as said Watkins may at any time de [60] sire.” He was only obligated to pay for snob patents as be expressly desired and requested, and no others. Tbe clause in tbe Luddington agreement is entirely too vague and general to cover tbe expenses now under consideration, and in no event does it inure to tbe advantage of tbe complainant. But on tbe facts it appears that Watkins bas expended and rendered himself liable for several hundred dollars in procuring additional patents. An attempt is made to show that Watkins is acting in hostility to tbe Wagner patent because be threatened to sue tbe complainant for infringing some other patent owned by him. Without knowing what bis patent covers, it is impossible to make a definite finding that tbe act of bis solicitor in writing to tbe complainant was in any way hostile to tbe Wagner patent. It is thought, therefore, that tbe rights of tbe parties must be determined upon tbe written transfers alone, and that tbe extrinsic evidence is largely irrelevant and throws little light upon tbe real issue, which is aptly stated by tbe complainant’s counsel as follows: “What equitable rights hg.s Watkins in said agreement? (of February 20th.) Has he forfeited them? Should the agreement be canceled as to him on complainant’s prayer?” And again, “The principal contention in this litigation is that Watkins, wholly failing to pay the royalties and moneys due under the agreement of February 20, 1894, has forfeited his rights under said license agreement, and that therefore the court is asked to rescind the same so far as Watkins is concerned.” By tbe agreement of February 20th Watkins is given tbe exclusive right, during tbe life of tbe patent, to manufacture and sell tbe patented typewriter. • Wagner retained tbe right to use, but this right, in view of what bad previously been conveyed, would seem to be of no practical value. An option was given to Watkins to purchase, within a year, all tbe Wagner patents for $15,000, but tbe option was never exercised. Watkins did not obligate himself to manufacture and sell any given number of machines, but bis failure to sell was guarded against by a provision that be should pay a royalty of not less than $2,400 annually. So that tbe agreement, so far as applicable to tbe patent controversy, was an exclusive license to Watkins to manufacture and sell upon tbe payment of a yearly royalty of $2,400. As long as this license was in force tbe entire interest in tbe patent remained in Watkins. All that Wagner retained was tbe right to use any machines which be then possessed. Tbe agreement of August 10,1894, seems to be regarded by both parties as an assignment of tbe title of tbe patent to Hagemeyer and Luddington together with tbe right to collect royalties under tbe February license. If this be tbe correct construction, and tbe court is inclined to tbe opinion that it is, Wagner retained no interest in tbe patent of tbe least value, and tbe right to demand and receive tbe royalties vested in Hagemeyer under tbe tripartite agreement referred to in tbe letter of Luddington of February 5,1896. Tbe effect of tbe conveyances thus far considered was to vest tbe entire interest under tbe patent in Watkins and Hagemeyer. Wagner bad no longer any interest. Watkins held an exclusive license [61] lo make and sell, and an undivided half interest in the invention, which was held in trust for him by Luddington, who agreed to convey to Watkins when Hagemeyer was paid the amount due him and he (Luddington) was paid $500. Ilagemeyer had an undivided one-half interest in the invent ion, and a lien on Watkins' interest until his debt for advances was discharged. In January, 1806, Hagemeyer demanded the royalties accruing December 31, 1895, and in February, 1896, he assigned all his interest in the patent to complainant. On the 7th of February, 1806, Franz X. Wagner and Herman L. Wagner, neither of whom had any tangible interest in the license to Watkins, assigned to the complainant “all their right, title and interest” therein. It will be observed that from the transfers thus far discussed the complainant obtained no right to manufacture and sell, but only the rigid to use the patented machine. The Hagemeyer assignment to the complainant makes no mention of any light to collect royalties, and, admitting that it conveyed the right to collect future royalties, it could hardly have been the intention to assign the $2,400 obligation them due, for Hagemeyer had made a formal demand only a month before requiring Watkins to pay to him. The same observations would apply to the assignment from Wagner to Hagemeyer were it not that at that time — August, 1894 — nothing was due under the Watkins license, and all the parties to the assignment understood that the transfer of the royalties was the consideration for the $5,300 paid. 'Wagner swears to this expressly; that Hagemeyer so understood it is plain from his demand, and it is also conceded by complainant Watkins never denied the obligation. The most favorable view of the complainant’s interest as thus far examined gives it an undivided interest: in the right to use the patented machine, and a right to collect royalties coming due after February 5, 1896. The complainant gets its right to manufacture and sell direct from 'Watkins, he having assigned a two-thirds interest, in the license of February 20, 1891, to Underwood and Lantry, and they having assigned to the complainant in February, 1896. If, as the complainant contends, the license was forfeited by the nonpayment of royalty in December, 1895, it may be pertinent to inquire how the complainant could obtain any valid rights thereunder in February, 1896. Assuming that the license is not forfeited, then the complainant has First. An undivided interest in the patent, carrying with it a right to use the patented machine. Second. The right transferred by Hagemeyer to collect the royalties due after February 5, 1896, and Third. A two-thirds interest in a license giving it the right to manufacture and sell the patented machine. All of the interests not owned by the complainant are owned by the defendant Watkins either individually, or as beneficiary under the Luddington trust. If it be held that the license is forfeited there still remains the Luddington interest, which it would seem may yet be acquired by Watkins on paying the amounts due to Hagemeyer and Luddington. The court is unable to see how in any event this interest can be confiscated, and Luddington be compelled to convey to the complain [62] ant, in the teetb of bis agreement to make no assignment “except upon the consent of said Watkins.” Is the license forfeited? The complainant expressly concedes the rule “that a mere nonpayment of a license fee does not entitle a party to a decree of annulment,” and this is undoubtedly the law. Walk. Pat. § 308. As before stated, there is in the agreement of February 20th, no express stipulation that forfeiture shall follow a breach of the agreement to pay royalties. The only royalty coming due prior to the commencement of this suit, was, on December 31,1895. Assuming that Hagemeyer, as the owner of a half interest in the'patent, could, without the consent of the owner of the other half, declare the license forfeited, he did not do so. He simply demanded that Watkins should pay to him. So far as appears from the proof, Hagemeyer still retains this chose in action against Watkins. Certainly he never transferred it to the complainant. It is not easy to perceive upon what theory the complainant can ask for a forfeiture, and especially in view of the apparent affirmance of the license by the demand in the bill “that the defendants may be decreed to pay to your orator the sums of money due under the said agreement of February 20, 1894.” It might with some plausibility be argued, in view of the interest of the other parties in the license, that Hagemeyer had no right to require that the full amount of the royalty should be paid to him, and, therefore, that his demand of January 3d, was inoperative. It is, however, unnecessary to consider this and similar questions, and it is only mentioned to show the complex and anomalous character of the situation, and the difficulty which surrounded all the parties in asserting and maintaining their respective rights. The court has failed to find proof that any one, whether he had the right to do so or not, prior to the commencement of this action, elected to declare the license forfeited. No notice of that character was ever served upon the defendant Watkins. The only obligaiion resting upon Watkins under the license agreement was to pay the royalty due December 31, 1895. This sum he has not paid. No one has asked him to pay it but Hagemeyer, and the demand was not coupled with a notice that tne license would be forfeited in case of nonpayment. If Hage-meyer had the right to make the demand and give the notice, he did not exercise it. No one else has done so. The court fully appreciates the unfortunate position in which the complainant is placed by what it terms the “dog-in-the-manger policy” of the defendant, but, after examining the case in all its aspects, the court is constrained to hold that the complainant’s title is too obscure to warrant the decree prayed for. To say the very least, the complainant’s title to all the rights under the patent is doubtful, and a forfeiture should not be declared in a doubtful case. The bill is dismissed.