The Union Manufacturing Co. v. . Lounsbury , 41 N.Y. 363 ( 1869 )

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[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] By the agreement, which forms the foundation of the present action, the plaintiff sold, assigned and conveyed to the defendants the right of making and manufacturing at the establishment, then occupied by the firm in Norwalk, felt cloth of the usual width of broadcloth, by means of a single set of machinery usually employed in the manufacture of felt cloth, and for the manufacture of which the plaintiff owned the patent. To this extent there can be no doubt entertained, but that it was intended by the parties that the sale should be one taking effectin praesenti; for that is the clear import of the language they made use of for the purpose of expressing their design. But this present, absolute right to make use of the invention was limited by the agreement to the period for which the patent then owned by the plaintiff had been issued. The sale was for the then unexpired term of the patent, and no longer. Beyond that there was no present sale, and no terms used indicating the design of making one. After that, the rights and obligations of the parties were rendered dependent upon a renewal of the patent being obtained by or for the plaintiff. If it failed in that, the relations of the parties under the agreement ceased at that point. But if a renewal should be obtained by and for the plaintiff, then the agreement proceeded to declare and define what the rights and obligations of the defendants should be in that event. Not in the form of the sale of an existing right, but in view of a contemplated contingency subsequently arising. These were, that the defendants should be entitled to make use of the set of machinery referred to, for and during the term for which the patent should be extended, if a renewal should be obtained by or for the plaintiff, upon payment of one cent a yard for the cloth made by means of it. Instead of being a sale, and therefore obnoxious to the objection that the plaintiff undertook to sell what it did not own, and which in fact had no existence, it was a declaration of what the rights, privileges and obligations of the parties should be in case the future circumstance it was evidently contemplated might afterward occur, should actually be found to come into existence. In that event, and only then, the defendants were to have the continued right to use the set of machinery in manufacturing the cloth alluded to during the period for which the patent should be extended. There was nothing unusual or uncommon in this part of the agreement, and it was not in conflict with any provision or principle of law or public policy. The necessities and convenience of future operations require that such agreements and stipulations should be maintained and enforced when the contingency arises on which they are to become obligatory on the parties entering into them. But even if the agreement depending upon the renewal had been made in the form of a present sale, it would be too late for the defendants to insist that it was legally inoperative as such, after enjoying, as they were found to have done in this case, the full benefit of the covenant concerning it.

Before the time had arrived, when the patent could be lawfully extended, the plaintiff secured the right to the extension in case that should be granted. This was fully provided for by the assignments received by the surviving patentee from the heirs and personal representatives of the deceased patentee, and the assignment made by him to the plaintiff. Under the laws of the United States, these were valid instruments, for by those laws the right of an inventor to a patent may be assigned, and patents may be, and in fact very commonly are, issued to the assignees of the inventor. (U.S. Stat. at Large, vol. 5, 193, § 6; Curtis on Patents, 3d ed., § 168.) After these assignments were made the patent was extended; first for seven, and then for fourteen years. The extensions were made in the names of the personal representatives of the deceased and the surviving patentees. But under their previous assignments they were necessarily held by them for, and turned to, the sole benefit of the plaintiff and such persons as had de ived rights under them as the owner of the original patent. This is the legal effect given to such instruments under the patent laws of the United States. (Gayler v. Wilder, 10 How. U.S. Rep., 477.) And which it was found by the court would have been followed by the courts of Connecticut, if the agreement in controversy had been before them for construction. In addition to that, all these assignments contained express covenants for the execution and delivery of such further instruments as might be requisite for the effectual transfer of the extensions that should be granted. And in performance of two of those covenants, the persons, in whose names the extensions were made, joined in a direct assignment of them to the plaintiff. It is plain, therefore, under these instruments, and the law applicable to them, that when the extensions of the patents were obtained, they were obtained for the plaintiff within the meaning of those terms as they were used in its agreement with the defendants.

But it was insisted, on the part of the defendants, that they derived the right to use the machinery mentioned in the patent, after that had expired from the act of congress, and not from the extensions; and that they are therefore not liable to pay the plaintiff the stipulated compensation. This argument was predicated upon that portion of the act, which provides that, when patents are renewed, the benefit of such renewal shall extend to assignees and grantees, of the right to use the thing patented to the extent of their respective interests therein. (5 U.S. Stat. at Large, 125, § 18.) But this fails to confer the right claimed under it. For it only protects such interest, as the assignee or grantee had in the use of the thing patented, and nothing whatever beyond that. It secures and maintains the right or interest the party has at the time of the extension or renewal, without conferring any additional right or privilege. In the present case, that was a qualified one. It was the right to use the machine invented, during the extension of the patent, upon the payment of the stipulated compensation; and this is fully maintained by the judgment recovered in this case. To the extent of the defendant's right to use the thing patented, they have the full benefit of the statute, even if they are required to pay the compensation they agreed to pay by this covenant. For that completely protects their interest in the thing patented, precisely as it was originally agreed they should enjoy that interest. And the statute has provided for no right or privilege to the assignee or grantee beyond that. Its object was to maintain just such rights as the grantee or assignee had in the thing patented; not to confer one that it had previously been expressly agreed in effect that he should not have, unless the compensation agreed upon was paid for it. The construction contended for, would confer a new interest or right, instead of doing what it was designed to accomplish, that of protecting previously existing rights simply.

It was also insisted, that the last proviso of the act of 1854, extending the patent for fourteen years, discharged the defendants from the payment of the manufacturing tariff after that time. By this, it was provided, "that all persons now enjoying the lawful use of the said invented machine, or any part thereof so patented, and the purchaser of any such machine, or any part thereof, may continue to use the same, notwithstanding the provisions of this act." (10 U.S. Stat. at Large, 776, § 7.) That is to say, those persons should continue to have precisely the same rights in the invention, which they would have had, if the act had not been passed. It was, in effect, providing that the persons having such lawful right, should continue to enjoy it, precisely as it had been previously acquired. There is nothing contained in this proviso indicating it to have been the intention of the law, to release persons who had secured such rights from the payment of the sums they had incurred on account of them. It leaves them precisely as they would have been, if the act had not passed, so far as such obligations were concerned. For it secures the continuance of their right, without affecting the contracts they may have made for the purpose of obtaining them, in any manner whatever. No language was made use of, that would have a tendency to discharge the persons referred to, from any of the burdens, they had voluntarily imposed upon themselves, in acquiring the interests protected.

The defendants had no right to use the patented machinery, in the manner specified in the agreement, without paying the plaintiff the compensation they had agreed to pay for that use. They could lawfully make use of the invention on no other terms. For they had bound themselves to that effect, by their covenant. The notice served upon them, forbidding them using or exercising the right mentioned in the agreement, after the twenty-eighth of August, 1854, was therefore no defence for them, even from that time; for they did continue to use it notwithstanding the notice; and that they could not lawfully do, without rendering themselves liable for the consequences they had covenanted should result from such use. They could not refuse compliance with the terms of the notice, and still claim that protection under it, which could only result from complying with its injunction. The parties could waive the consequences of the defendants' breach of the covenant; and that they did, by the defendants' continued use and enjoyment of the rights secured to them by means of it, and the subsequent acquiescence of the plaintiff in that use.

The judgment should be affirmed.