Dunkley Co. v. California Packing Corp.

HOUGH, Circuit Judge

(after stating the facts as above). The above statement shows that the license of 19Í4 was a settlement of expensive conflict between Dunkley and the Fruit Canners’ Association; the consideration is manifest, entirely apart from the formal recital.

Two phrases of this document are especially important: (1) The association is licensed “for the benefit of itself and its successors,” and (2) the privilege is granted for the use of the Dunkley invention “in, connection with (the associatidn’s) business relative to the canning or treatment of fruit.” •

[1] One preliminary contention may be put aside; it is suggested that, since the license is merely to use, no one acting thereunder can make the licensed article. This is not true, for “if the circumstances indicate such an intention, a license to use implies a license to make the thing to be used.” Edison, etc., Co. v. Peninsular Light, Power & Heat Co. (C. C.) 95 Fed. 669, 676 , citing cases. In 1914 all that Dunkley had were applications for two patents, one for a machine, the other for a process; and every circumstance points to. the conclusion that his licensee was expected’ to make or have made whatever machine it desired to use; while, as for the process, it is difficult to see how any one can be licensed to use a process, without by necessary im *999 plication having the right to devise and build whatever apparatus exemplifying the process seems good to the licensee.

Considering the first phrase of the license agreement: While the word “successor” is a term of art, it is of the most general signification, meaning no more than “one who follows or comes into the place of another.” Historically it is the equivalent, when applied to a corporation, of the word “heir” in connection with a natural person. Bouv. Law Dict, and citations. In conveyancing it. is necessary to insure more than a life estate in a corporation sole (Boston v. Sears, 22 Pick. [Mass.] 122), hut, though usual, a grant to a corporation aggregate without the phrase is prima facie in perpetuity, inasmuch as the company is usually perpetual (Union Co. v. Young, 1 Whart. [Pa.] 410, 425, 30 Am. Dec. 212 : Chancellor v. Bell. 45 N. J. Eq. 538, 541, 17 Atl. 684 ).

Doubtless a license, without more, is but a personal privilege expiring by operation of law with the death of the licensed individual, or with the cessation of business life in the case of a corporate recipient (Keystone, etc., Foundry v. Fastpress Co. [C. C. A.] 272 Fed. 242 , Op. filed Feb. 2, 1921), yet if the grant be also to heirs or successors it is plain that the property is descendible. Usually descendibility carried with it the quality of assignability, and it has been held that the words “heirs or successors” import assignability. Wood Harvester Co. v. Minneapolis, etc., Co. (C. C.) 61 Fed. 256, 258 .

“Successor” is a plastic word, and “in modern acceptation has a broader significance than succession in respect to the estate of a deceased. It may mean * * * succeeding to a place, or a right, or an interest or a power, official or otherwise. It may mean succession in corporate control.” American, etc., Co. v. Campbell, 138 Fed. 531, 534 , 71 C. C. A. 55, 58 .

[2] Both from reason and authority we conclude that a grant to a corporation and its successors is a phrase to be interpreted according to the surrounding circumstances. There can be no doubt that one corporation may be the successor of another, although there is neither a merger nor technical consolidation. Lightner v. Boston, etc., Co., 1 Low. 338 , Fed. Cas. No. 8,343. Indeed, where what is ordinarily called consolidation occurs, the presumption (in the United States courts) is that all the constituent companies retain their corporate identity. Keokuk, etc., R. R. v. Missouri, 152 U. S. 301, 305 , 14 Sup. Ct. 592, 38 L. Ed. 450 . Two corporations may “remain separate legal entities and yet be merged for all practical purposes,” as was said in Southern Pacific Co. v. Lowe, 247 U. S. 330, 337 , 38 Sup. Ct. 540, 62 L. Ed. 1142 ; but always it is necessary to consider the connection in which words of succession, merger or consolidation are used.

The second phrase above quoted from the license shows that the Dunkley devices were to be utilized in a business; ■ context and evidence prove that that business was the preserving of fruit, for which the peeling thereof was and always would be necessary. There was thus excellent reason for stating that the invention was licensed for use “in connection with” the association’s business; and it is reasonable to read *1000 the phrase of succession in conjunction with the phrase relating to a business use.

A license is but “the right not to be sued,” yet it is also a piece of intangible, incorporeal personal property, and, in the nature of its estate, does not differ from many other privileges or (in a very broad sense) franchises.

It is this similarity which renders applicable to the matter in hand such cases as International, etc., Co. v. Smith County, 65 Tex. 21 , and Grand Canyon, etc., Co. v. Treat, 12 Ariz. 69 , 95 Pac. 187 , affirmed 222 U. S. 448 , 32 Sup. Ct. 125, 56 L. Ed. 265 , where, speaking of the privilege of exemption from taxes as passing from the exempted corporation to one purchasing its property in foreclosure, the court held that—;

“The word ‘successors’ is evidently used to designate such corporations or persons as may in any lawful manner acquire the proprietorship of the corporate rights and property through which they are to he exercised.”

In these cases the' privilege of exemption was held to be attached to the property, and the “successor” reasonably and legally to be that company which “came into the place of” the original recipient of the privilege. In like manner, an easement (another piece of incorporeal but descendible property) has been held when granted to one “and his successors” to be attached to the business of a certain.store and to pass with the business. Ainslie v. Eason, 107 Ga. 747 , 33 S. E. 711 .

Without any written license the doctrine here contended for by appellee was enforced in Wilson v. Wilson Corp. (D. C.) 241 Fed. 494 , and in Lane, etc., Co. v. Locke, 150 U. S. 193 , 14 Sup. Ct. 78, 37 L. Ed. 1049 , it was held to be sufficient to work a succession to a license privilege enjoyed by a copartnership, that the succeeding “company was organized upon the same basis as the firm; that the business of the company was to be the same as that carried on by .[the firm], and to be carried on in the same premises; that the - entire property and assets of the firm and its liabilities and obligations * * * devolved upon the company.” This decision sufficiently discusses and distinguishes the earlier decisions.

Nor is it perceived that Niagara, etc., Co. v. Hibbard, 179 Fed. 844 , 103 C. C. A. 330 , favors appellant’s contention, though much relied upon. In that case the patentee gave a corporation a ten-year license without any clause of succession. During the ten-year period, the licensee in question transferred all its property to a new company formed in another state, but the new concern did not assume the liabilities of the assignor. It was held that the second corporation was “not the successor or heir” of the original one. Plainly in that case there was no intention to make a perpetual grant. Again, it is of the essence of a legal succession that in all material respects the succeeding corporation should stand-in the boots of the old one, and the deliberate omission to assume liability was itself enough to prevent that continuity of business and corporate life which is the essence of succession.

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[3] Result is that when in due legal form this defendant succeeded not only to the business but (as proven) to the franchise, property, liabilities, and good will of the Fruit Canners’ Association, it became within the purpose and meaning of the license agreement the successor of the licensee.

[4] . It is urged that this result is an attack upon Dunkley’s rights as assured in the case brought in the Northern district of California, because he there obtained injunctions .against two canning companies which have now been acquired by this defendant. But this is a mistaken view of legal rights; the injunction referred to necessarily ran against certain corporations; it affected the corporate personalty, and a license likewise affects persons and corporations, and does not directly reach machinery and buildings. The Griffin & Skelley Company and Central California Company may well remain under injunction and be required to account; but that is no reason why an unlimited licensee of Dunkley’s may not buy the property of these two enjoined corporations and under his license use on his own property and in his own business machines properly forbidden to the former proprietors.

Holding as we do that this defendant is the plaintiff’s licensee, we need not go further and consider the validity and scope of Dunkley’s patents. On this point we express no opinion, but affirm the decree below on the sole ground of license. Appellee will recover costs.