Berlin Machine Works v. Perry

Exon, J.

The only object of this action is to obtain an injunction perpetually restraining James L. Perry, the defendant, “ from manufacturing, selling, or causing to be sold sand-papering machines of any description,” which he covenanted with Charles A. Mather not to do, but which he has done and threatens to continue to do, contraiy to the terms of such covenant. Counsel for defendant maintain that the covenant is not assignable, and hence that no one but Mather can have an action for the breach of it. We do not determine the question, but assume, for the purposes of the case, that the plaintiff corporation may maintain an action for such breach, just as Mather could have done had he not assigned his interest in the covenant.

Thus assuming the assignability of the covenant, the only question to be determined is whether it is binding upon the defendant. That is to say, Is it a covenant which it was competent for the defendant to make ? or is it invalid as *499 against public policy? The covenant is general and unrestricted. It binds the defendant, unless Mather consent in writing that he may do so, not to “ manufacture, sell, or cause to be sold, any sand-papering machines of any description.” The prohibition is not qualified or limited by time, place, or circumstance. It is as general and comprehensive as can be expressed by language. It has no relation to the sale of a business secret, or any infringement of a trademark or patent.

The law undoubtedly is that the covenant under consideration, prima facie at least, is void, and will be so held on ' demurrer unless the party asserting its validity has averred facts in his complaint from which the court can say the restriction is not larger than is reasonably necessary for the protection of Mather in the enjoyment of the business and patents he purchased of the defendant. If it extends beyond that it is unreasonable and the covenant is void. In view of the averments of the complaint we think the restriction does extend far beyond that limit. It would be a breach of the covenant were the defendant to manufacture, sell, or cause to be sold any kind of sand-papering machines in Canada or Mexico, or at any point in the eastern hemisphere, although the complaint shows that the plaintiff’s business, assigned to it by Mather, is confined to the United States. Again, should the plaintiff abandon its business, and should the manufacture and sale of machines under the patents thus sold by defendant to Mather cease entirely, it would still be a breach of the covenant were the defendant to manufacture and sell a sand-papering machine in any place, although it did not infringe any of such patents. Furthermore, the covenant does not limit the prohibition to such machines as would or might come in competition with Mather’s business. The defendant might be able to invent a sand-papering machine applicable to uses to which those made by Mather and the plaintiff were not adapted. What *500 reason can there be for restricting him from doing so, if he is not in competition with the business he sold to Mather ? We perceive none.

But it is claimed that this case is not within the above rule for several reasons. These will now be considered.

1. An argument is predicated upon the averment in the complaint that the defendant is a carpenter and joiner and had formerly worked at that trade. It is claimed that no restraint he might impose upon himself in respect to any other business or employment could be unlawful. There is no such rule of law. Besides, the complaint shows that he is also an inventor of sand-papering machines. The law would protect him against illegal restrictions in respect to the latter business just as readily as it would against such restrictions affecting his business as a carpenter and joiner, and on the same principles. The point is scarcely worthy of notice.

2. It is also urged that there is nothing in the covenant in question which interferes with the right of the defendant to invent other sand-papering machines, not infringing the patents sold to Mather, and to sell the inventions. It is said that such purchaser might manufacture and sell the after-invented machines without working thereby a breach of the covenant. It seems to us that this would be a very dangerous concession for the plaintiff to make were the covenant valid. It points out an easy way to make the covenant worthless. But we think the concession improvidently made. We are quite clear that if the defendant invents a machine for which he obtains letters patent, and sells the patent to one who makes and sells machines under it, the defendant thereby causes the machine to be sold, within tbe meaning of his covenant with Mather.

3. Neither is the position tenable that the courts of this state will consider the restriction as applicable only to Wisconsin. Were the covenant valid, our courts would take *501 cognizance of a breach thereof committed in any other state or country the same as though committed in this state.

4. An alleged rule to the effect that restrictions of the character under consideration, if made as incidental to the sale of patents and a business thereunder, are valid, no matter how general and unlimited such restrictions may be, is invoked to uphold this covenant. But the cases cited to sustain such a rule do not sustain it as broadly as claimed. They hold that such restriction is valid only when, in the judgment of the court, it is not unreasonable, due regard being had to the subject matter of the covenant. Tested by that rule we have seen that the restriction in this case is not a reasonable one, because not necessary to the protection of the covenantee. In other words, this restriction is not, in any correct sense of the term, incidental to the sale of patents and a business thereunder, but reaches far beyond the point of just and lawful protection to such business.

5. It is also urged that because the restriction affects only a single class of machines, and does not cover the trade of a machinist, it is not within the rule which vitiates contracts in restraint of trade. The position cannot be sustained. "While the restriction relates only to sand-papering machines, the defendant is an inventor of such machines, and the covenant unreasonably and unnecessarily prohibits him from pursuing his trade or profession. It is, therefore, within the rule that s,uch covenants are void.

We do not feel called upon to go into a discussion of the history of the law concerning contracts in restraint of trade, or the grounds upon which the rules above stated are founded. It would be an agreeable task to elaborate these subjects, did the exigencies of the case require it'. This has been well done, however, in a late treatise of much merit. Greenhood on Public Policy, part XIV, ch. 6. The author has there cited and collated practically all the cases in Eng *502 land and this country on the subject of contracts in restraint of trade. These cases are very numerous. The most of the materials for the very elaborate and able briefs of the respective counsel seem to have been drawn from this treatise. "We have deemed it unnecessary to cite cases to each rule laid down in this opinion, believing it sufficient to refer to Mr. Greenhood’s work where the cases will be found intelligently classified and arranged under proper heads.

By the Oourt. — -The order sustaining the demurrer to the complaint is affirmed.