Harrigan v. Smith

'The opinion of the court was delivered by Collins, J.

The complainant failed to establish the final contract alleged, or any contract at all as to improvements on the defendant’s original invention or as to participation, as partner or otherwise, in defendant’s profits. The only contract proved was with reference to the invention on which the defendant had applied for a patent on November 2d, 1887, and for which letters numbered 396,177 were .issued January 15th, 1889. This contract was oral, and, according to the testimony of all concerned, must have been made near the beginning of the year 1888. Its effect was to give to the complainant a three-sixteenths interest in the in *640 vention and in the expected patent, for a consideration of $750. The exact tenor of the contract is hard to gather from the testimony, but, in the light of a receipt afterwards given by defendant, I think that it was an absolute contract of purchase in prcesenti. This receipt was given on December 6th, 1888, and reads as follows:

“ Newark, N. J., December 6th, 1888.

“Received from Ellen McLane and William Harrigan, five hundred and twenty-five dollars, on account of fifteen hundred dollars, for three-eighths (■§-) interest in patent tapping apparatus.

“Anthony P. Smith.”

I think that this paper indicates that by the contract the purchasers became immediately entitled to their respective interests in the invention, conceded to have been several and not joint, and that the seller became immediately entitled to the purchase price.

An inchoate right in a patentable invention is a subject of lawful sale, and a sale of such a right carries with it a corresponding interest in the patent when letters are afterwards issued. Clum v. Brewer, 2 Curt. C. C. 506; approved, Hendrie v. Sayles, 98 U. S. 546 . In Clum v. Brewer it was said by Mr. Justice Curtis that if the purchaser does not get the legal title, a jus in re, he certainly does get an equitable title, a jus ad rem, and can use or license others to use the invention, and can at any time demand a formal assignment of his interest in the patent. In the case that was then before the court, the written contract provided, in terms, for an assignment of the purchased interest, when the patent should issue; but even without such an agreement an obligation to assign is necessarily implied in a sale of an interest in such an invention.

It makes little difference whether we consider the contract between the parties to this cause as one of purchase, or as one for purchase, for the defendant admits an agreement to assign on payment of the purchase price. Specific performance of an oral contract to assign an interest in letters-pa'tent when issued will be compelled. Such a contract is neither within the statute of frauds nor within section 4898 of the United States revised *641 statutes, requiring assignments of patents to be in writing. Dalzell v. Duerber Manufacturing Co., 149 U. S. 315 .

The reasons given by the learned vice-chancellor for the denial of a decree for the specific performance'of the contract claimed by the complainant are cogent, and, perhaps, convincing; but I can see no objection to.a decree enforcing, on equitable terms, the contract admitted by defendant. Mere lapse of time will not defeat a claim of equitable ownership in a patent. In Clum v. Brewer, ubi supra, the original agreement was made in 1838, and Judge Curtis, in 1855, said that the purchaser then had the right to call for an assignment of even an extension of the patent, which he held was necessarily implied in the sale of an interest in the invention.

The defendant has always acknowledged the complainant’s right to an assignment of a three-sixteenths interest in patent 396,177. In his answer, indeed, he alleged that the contract therefor had been rescinded, but he offered no proof of rescission. On the contrary, he testifies to his willingness, in 1891, to assign such an interest. The only dispute was that complainant demanded more. He adds: “ I always intended to give him what he bought.” He admits receiving $400 on account of the purchase price, and while it is true that the complainant made no tender and demand in conformity with the contract, it is also true that neither did the defendant. The defendant has always recognized the complainant’s rights, and, in his answer to so much of the bill as sought to enjoin a contemplated sale, he averred that he intended to except those rights. In the sale that he has made, pendente lite, he has excepted those rights.

That the claim of the bill is too broad and the original contract not accurately stated should not work a dismissal. The real contract is sufficiently proved; there is a prayer for general relief and .the court ought to make an end of the controversy. A decree should be made under which the complainant may be assured the legal title to a three-sixteenths interest in patent 396,177 as of the date of such decree, but no other relief should be accorded. If we were to go farther and require an account of past profits or royalties injustice would be done. Joint *642 owners of a patent are not partners. Parkhurst v. Kinsman, 2 Halst. Ch. 600; S. C., 1 Blatchf. 488 ; Marsh v. Newark Heating, & c., Co., 28 Vr. 36 . Each owner, legal or equitable, in a patent may use it or license others to use it, or grant rights under it. The cases are unanimous to this extent. A tentative suggestion of Mr. Justice Hall, in Pitts v. Hall, 3 Blatchf. 201 , that an assignment or a license by one co-owner should be considered as an infringement on the rights of the others and, at their option, be treated as a conversion actionable at law, met with no favor and has long ago been repudiated. Accountability for profits or royalties where there is no partnership or other agreement on the subject is, strange as it may seem, still a moot point on which there has been very little direct pertinent adjudication. The only real decision on the subject is Vose v. Singer, 4 Allen 226 , in which case, in 1862, the question was treated as one of first impression. In a well-reasoned opinion, fortified by alleged concurrence with the views of those members of the legal profession who were specially versed in patent-rights, the Massachusetts supreme court denied the liability of a part owner of a patent to his co-owners for any portion of the profits arising from the sale of the patented articles. This deliverance has been followed both in England and in this country by dicta even more broadly asserting the doctrine of non-accountability. Mathers v. Green, L. R. 1 Ch. App. 29 (1865); De Witt v. Elmira, &c., Co., 66 N. Y. 459 (1876); Burr v. De La Vergne, 102 N. Y. 415 (1886); Gates v. Fraser, 118 Ill. 99 (1886).

In the New York case first cited, the court of first instance ( 5 Hun 301 ) drew a distinction between personal use by the part owner and a transfer of rights, which was approved in the Illinois case when first considered (9 Bradw. 624), but the court of last resort recognized no such distinction. On the other hand, Chancellor Halsted, in 1847, seems to have taken it for granted that co-owners of a patent must account to one another, even for individual manufacture and sale. Parkhurst v. Kinsman, 2 Halst. Ch. 600. Judge Drummond, in 1876, while conceding that the difficulties in the way were nearly insurmountable, *643 •expressed his opinion that a licensor of patent-rights, who was -only a part owner of the patent, ought to be made to account to his co-owners if he received more than his equitable share • of profits (Dunham v. Indianapolis, &c., Railroad Co., 7 Biss. 223 ), and last but not least Mr. Justice Bradley, in 1887, in the United States circuit court for New Jersey, declared in favor of •the strictest accountability to co-owners for every sort of dealing with a patent. Aspinwall Manufacturing Co. v. Gill, 32 Fed. Rep. 697. He said, however, that the matter was unsettled and .his opinion purely speculative. Our own supreme court con.siders the subject an open one. Marsh v. Newark Heating, &c., Co., ubi supra.

It would be very unjust to permit the complainant, who, for •years, during this unsettled state of the law, has stood idly by while the defendant, by his energy and industry, was building •up a business, now to come in and even raise the question of a right to share in the success of that business in the past. He •did not sow and he should not reap. It is enough that we do not suffer his laches to bar him from the aid of a court, of equity .to compel a formal assignment of his interest in the patent. He may stand upon his legal rights if he will, but if he seeks • equitable aid he must accept it on equitable terms, and those are vthat an accounting be denied.

Because we reach this conclusion we will hot inquire into .another question raised in the case, and that is whether any of the defendant’s profits have been derived from the patent in which complainant has his interest. The second patent was .applied for December 29th, 1888, and issued January 21st, 1890. Defendant says, and seems to have proved, that it is for .a substantially different invention from that of the first patent. While a mere change in construction of a machine or apparatus will not defeat a patent on the real invention involved (Parkhurst v. Kinsman, 1 Blatchf. 488 ), yet a substantial variation or improvement does not enure to an assignee (Essex Button Co. v. Paul, 48 Fed. Rep. 310.)

Apart from this, defendant attempts to prove, and has not •been satisfactorily answered, that it was discovered that both *644 his patents infringed on an earlier one issued to James Curran, which he was therefore compelled to buy, and that it is under that patent that his business has been conducted. If these claims be well founded complainant’s right will be a barren one, but we will not prejudge it. Such claims would only be available in this action to defeat an accounting, and to that end are unnecessary. Questions of validity of. patents are more properly, if not exclusively, within the jurisdiction of the federal courts. They certainly cannot be drawn into a state court except collaterally, and there is no need for such collateral inquiry now. It is better that those suggested in this cause shall be directly tried and settled in the future conduct of business by these parties.

The decree appealed from should be reversed and a new decree be made, simply giving to the complainant the formal assignment to which we adjudge him to be entitled, on terms that he pay into court or to a master who shall supervise the execution of the instrument the sum of $350 without interest.

Inasmuch as the complainant never demanded such an assignment as he was entitled to receive, and never tendered payment of the purchase price therefor, except on a demand with which the defendant could not comply, and came into court with a broader claim than he could sustain, no costs in the court of chancery should be allowed him. If the complainant shall not, within a short time to be fixed by the court of chancery, comply with the terms above imposed the bill may be dismissed, with costs.

The appellant is to have costs in this court.

For affirmance — The Chief-Justice, Depue, Van Syckel, Dixon, Garrison, Lippincott, Gummere, Ludlow, Collins, Bogert, Nixon, Hendrickson, Adams, Vredenburgh — 14.

For reversal — None.