Case ID: nj-eq_6/html/0600-01.html
Source: Caselaw Access Project
Author: {"author": "The Chancellor.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

STEPHEN R. PARKHURST v. ISRAEL KINSMAN AND WILLIAM CUNDLE.
    1. P., owning two-thirds of a patent right, filed a bill against K., to whom he had sold the other third, to compel the performance of an alleged agreement between them by which K. bound himself to discontinue the manufacturing under the patent, when he should have made enough out of the profits of the business to reimburse him certain advances* he had made for commencing the manufacture, the hill alleging that he had made enough to reimburse his advances. The bill prayed that K. might be decreed to discontinue, and prayed an injunction restraining K. from manufacturing. K., by answer, read as an affidavit on the application for an injunction, denied that he had yet reimbursed himself, and also denied that he was manufacturing under the patent, and claimed that the article he was manufacturing was not within the patent, but a different article.
    2. The injunction was denied.
    In July, 1846, Stephen R. Parkhurst exhibited his bill, stating that on the 1st of May, 1845, he, being the original inventor of a certain machine, (described in the bill,) obtained letters patent, under the seal of the patent office of the United States, granting to him, his heirs, administrators, or assigns, for 14 years from that day, the exclusive right of constructing, using, and vending certain new improvements in the construction, arrangement, and combination of mechanical means for picking, ginning, and carding wool, hemp, or cotton, so as to separate the fibres of those articles from seeds and foreign substances, either acting separately, or in combination with the common carding machine.
    That on the 22d of May, 1845, he entered into an agreement with Israel Kinsman, a merchant of New York, reciting that he had invented a machine for picking, &c., which he claims as his own invention, and has taken out letters patent for, and providing that he, in consideration of $1, and of the covenants and agreements therein contained, doth sell'and transfer to Kinsman, his heirs and assigns, the undivided 3d part of his right, title, and interest in said machine and of all improvements which ,he, Parkhurst, might thereafter make thereon; also an undivided third part of a drying machine, lately patented by him, Parkhurst; and that Kinsman, in consideration thereof, covenanted and agrees to pay Parkhurst $2000, in cash down, and his note at sixty days for $1000; also to loan the concern the necessary amount of money, not to exceed $1000, to purchase machinery, stock, &c., to manufacture machines, which sum shall be repaid to Kinsman out of the first profits realized from sales; also agrees to give his personal attention, so far as necessary, to the business of the concern; ail expenses for labor, materials, manufacturing, &o., consequent upon a vigorous prosecution of the business, to be first paid out of the proceeds of sales, and the balance, over and above what is necessary for capital to prosecute the business to advantage, to be paid over, from time to time, to the parties aforesaid, one-third to Kinsman and two-thirds to Parkhurst.
    That the complainant went into business under the said articles of agreement, and continued to manufacture said machines, at No. 60 Vesey street, New York, until it became necessary for him to go to England, when he executed to Kinsman a power of attorney to carry on the business of said manufactory for the mutual benefit of said Kinsman and the complainant, according to the provisions of the said agreement; which power of attorney Kinsman received and acted under, for a few months, when •the complainant returned from England, and Kinsman then surrendered to him the said power of attorney.
    That it became necessary for him again to go to England ; and he then, to wit, on the 4th of November, 1845, gave a power of attorney to one Warren Holt, of Bloomfield, New Jersey, to carry on the said manufactory in the same manner in which it was then conducted; and on the 6th of November, 1845, the complainant left for England.
    That Kinsman then went on making said machines, using the complainant’s tools and implements for that purpose; and that Kinsman, when he was acting under the power of attorney so given him by the complainant as aforesaid, made and sold a number of said machines, and secured the whole of the proceeds of said sales, and received for machines made by him, between November 6th, 1845, and the month of February, 1846, more than $1400.
    
      That the manufacture and sale of said machines is a profitable business, and that Kinsman retained all the proceeds and profits of the sales so made by him; and though often requested by said Holt, the attorney in fact of the complainant, to pay over to him, for the complainant, the portion of said profits belonging to complainant by force of the said letters'patent, and of said agreement, and which was due the complainant, the said Kinsman refused to pay the same either to the complainant or his said attorney; and although he repeatedly promised said Holt that he would render an account of the sales and the profits in said business, yet he always neglected so to do, and when applied to by Holt, would make excuses and postpone the giving of such statement of said accounts.
    That Kinsman had made some advances and been to some expenditure in carrying on said business, but the complainant is ignorant of the amount so advanced and expended by him; but avers that Kinsman, on or about February 9th, 1846, told Holt, the attorney of the complainant as aforesaid, that he would in a few weeks realize enough from said business to pay all the debts arising therefrom, and to cancel all his demands; and Holt, for the purpose of being relieved from any further difficulty with Kinsman, in the name of the complainant, made and executed an agreement with Kinsman as follows: (setting out the agreement.) It is executed February 9th, 1846, between Kinsman, of New York, of the first part, and Parkhurst, of same place, of the second part. It recites that Kinsman has advanced moneys and become responsible for various sums which had been expended in getting up machinery, tools, stock, &c., for the manufacture of burring and carding machines invented by Parkhurst, one-third of which he sold and assigned to Kinsman; and then provides that Kinsman, in consideration of $1 to him paid by Parkhurst, contracts and agrees that as soon' as the profits which have accrued, and which might thereafter arise from the manufacture and sale of said machines so made and sold by Kinsman, shall be sufficient to pay all legal demands for the purchase of machines, tools, &c., and the expenses incurred by Kinsman, that then Kinsman shall and will discontinue the manufacture and sale of ¿aid machines ; and that all the machines he shall manufactura and sell after that date shall not be sold for a less profit than $100 each; and that he will be accountable for $100 profit on each machine made and sold from that date, unless he has the written consent of Parkhurst to sell for less. And Parkhurst, in consideration of $1 to him paid by Kinsman, and of the agreements aforesaid, covenants and agrees with Kinsman that he will go on and manufacture said machines, as soon as Kinsman discontinues the same, and that he will not sell any machine for a less profit than $100, without the written consent of Kinsman, and that he will pay over to Kinsman one-third of said profits on all machines he makes and sells thereafter; and that for any machines he may make or have made before-the discontinuance of the building the same by Kinsman, he shall be subject to the same restrictions of selling for at least $100 profit on each, one-third of which shall be paid to Kinsman. Signed and sealed by Kinsman, and for Parkhurst “by Holt, by power of attorney.”
    That on the day on which said agreement was executed and delivered, Kinsman had, without the knowledge and consent of Holt, and while the complainant was absent in England, sold all the tools and implements procured for the purpose of making said machines, and which were then in the shop No. 60 Vesey street, New York, to William Cundle, of Paterson, New Jersey, for which tools Cundle gave his no(e, payable to Kinsman, in a sum unknown to complainant.
    That Cundle removed said tools to Paterson ; and that he and Kinsman have ever since been employed in making and selling said machines, and have realized large profits therefrom.
    That Kinsman stated to Holt, attorney as aforesaid, in November, 1845, that all the debts of the concern did not exceed $1600.
    That Kinsman sold machines, during November and December, to the amount of $1400, and continued making machines up to the 9th of February last; and that since that time Kinsman and Cundle have sold at least from 30 to 40 of said machines, and by the agreement last aforesaid they were not to be sold for a less profit than $100 each, without the written consent of complainant or his said attorney.
    That the note for $1000, given by Kinsman to complainant for one-third part of the patent right, as stated in the first-mentioned agreement, has never been paid, either in whole or in part, which note would constitute a just and equitable set-off against any claim Kinsman might have had by reason of any expenditures or advances. And the complainant avers that Kinsman is largely indebted to him by reason of his neglecting and refusing to pay over to complainant the portion of the profits which, by the agreement first set forth, belong to him; that Kinsman, up to this time, neglects and refuses to render any account to complainant, of his said attorney, of the proceeds and profits of the business, or to surrender up the manufacturing of said machines to the complainant, according to the provisions of said last agreement; but is now, in connection with Cundle, manufacturing on their own account, and to the injury and damage of complainant.
    That Kinsman and Cundle, with a view of still further injuring the. complainant, have sent and still send out and sell said machines, without making or stamping them as the patent of the complainant.
    That the complainant is ready, and has made arrangements and is desirous to carry on the manufacture of said machines, according to the terms of the agreement secondly set forth, as soon as Kinsman shall surrender up the said manufacture, as by the said agreement he ought to do.
    The bill charges that Kinsman and Cundle refuse to render an account to the complainant of the business connected with the making of said machines, or of the amount received from the sales thereof, and refuse to pay to the complainant, or said Holt, the two-thirds of the profits, or to account for the same; and that, although said Kinsman has been much more than remunerated for any advance or expenditure by him made, yet the said defendants refuse to surrender up the business to the complainant, or to Holt, his attorney ; but the defendants pretend, among other things, that the machines made by Kinsman and Cundle since February 9th, 1846, are hot like the machines patented by the complainant, but are an invention and improvement of their own ; whereas the complainant charges that they are, in all material respects, the same.
    The bill prays that the defendants may be decreed to account for all money received from the sale of the machines from the said 1st of May, 1845, and to pay over to the complainant two-thirds of the profits ; and that the defendants may be decreed to surrender up the business of manufacturing said machines, according to the provisions of the last-mentioned agreement; and that the defendants may be enjoined from further manufacturing or selling said machines, or any machine which in any manner is included in the said patent.
    An application was made, on the filing of the bill, for an injunction according to the prayer thereof, and notice of the application was directed to be given ; and, after argument, the injunction prayed was denied.
    The application was renewed, and the parties were again heard. On the second application, Kinsman’s answer was read as an affidavit.
    He admits the patent to the complainant; but says he cannot admit that the complainant is the original inventor; but sayé that the merit of the invention belongs to Charles G. Sargeant, of Lowell, Massachusetts.
    He admits he entered into the agreement of May 22d, 1845, and says that he paid the $2000 therein named, in cash, and gave his note for $1000, which has not been taken up; but he says he has charges against the complainant as offsets, for more than sufficient to balance the note.
    He admits he went on making machines under said agreement, at No. 60 Yesey street, New York, and that when the complainant went to England, he did, at the suggestion of this defendant, to avoid all question as to this defendant’s power and control over said business, execute to him a power of attorney to conduct the business on his account during his absence, and which power ceased on the return of the complainant to the United States.
    He admits that on the complainant’s leaving this country a second time for England, he gave a power of attorney to said Holt, to conduct said business in his behalf ; but he has no remembrance of the extent of the powers conferred by that instrument on Holt, who is the son-in-law of complainant, and he therefore asks that the said power of attorney may be produced and proven.
    He denies that, by said power, or any other, the complainant authorized Holt to enter into the agreement of February 9th, 1846, so as to bind the complainant thereby.
    He admits that, after entering into the agreement of May, 1845, he laid out, from time to time, large sums in machinery, stock and tools, to conduct the business, a particular account of which is contained in Schedule A, annexed ; and that he sold a ¿umber of machines made under said agreement, of which Schedule B, annexed, contains a true account; that he has subjoined, in Schedule C, annexed, a general statement showing the balance due him on the account for work done and sold, and expenses incurred under said agreement, and which he believes to be correct; and he says he has no recollection, beyond what these accounts show, of the amount due him, at any particular time or times, nor that he stated to Holt, in November, 1845, that all the debts of the concern did not exceed $1600 ; that if any sum was named it must have been merely conjectural, for the accounts were not made up, and he did not know either the amount of moneys expended by him for the concern, or the amount received from sales.
    He denies that he did, to his recollection, say to Holt, in or about February, 1846, that he would, in a few weeks, realize enough from the business to pay all the debts.
    He admits that, on the 9th of February, 1846, he entered into the agreement with Holt in behalf of complainant. He says that, prior to entering into this agreement, he had heard from Ziba Parkhurst, brother of complainant, that said Sargeant claimed- to be the inventor; but that, to the time of signing said last agreement, he believed that the complainant was the inventor, and that Sargeant was an impostor, and so expressed himself.
    He says he believes the accounts annexed contain a full account of all the machines made or made and sold by this defendant under said agreement or the said patent. That he found the machines made according to the patent, whether complainant was the inventor or not, would not answer the purpose, and ho accordingly gave up making machines according to it, and made an arrangement with Cundle, of Paterson, New Jersey, for constructing machines on a new plan, and which, he admits, they have been engaged in making, and have made and sold to a considerable extent; and he denies that the said machines so made by him, and of which he has rendered no account in the schedule annexed, were made under the complainant’s patent, or ^nder any agreement stated in the bill, or in violation of the terms of the agreement of February 9th, 1846.
    He admits he sold the tools in the shop in New York to Cundle, and he supposes he liad a perfect right to do so; that the sale was made in good faith, and the concern credited with the proceeds ; and he denies, if such is intended to be intimated by the bill, that the said tools were ever designed to go into the possession of Holt.
    He admits that Cundle took said tools to Paterson, and that ho worked there for and on account of this defendant, and that Cundle has no interest in this suit beyond that of this defendant, nor in the manufacture and sale of said machines.
    He denies he owes the complainant, but insists that the complainant is largely indebted to him; and that he would have a perfect right to go on and manufacture machines to a very considerable extent beyond those already made, and sell them, to discharge the indebtedness of the said concern to him, and for advances made by him.
    He admits that, on the machines now making by him, he does not stamp the patent of complainant, and for the reason that they are not made under said patent.
    He says he is willing and desirous to settle his accounts with the complainant, and has always been willing and desirous to do so.
    
      F. T. Frelinghuysen and Mr. Staples, of New York, for the motion.
    
      
      W. Pennington, contra.
    
   The Chancellor.

The complainant owns two-thirds of the patent, and the defendant one-third. The bill is filed to compel the performance of an agreement by which, it is alleged, the defendant bound himself to discontinue manufacturing the machines when he should have made enough out of the profits of the business to re-imburse him certain advances he had made for putting the manufacture of the machines in operation. The bill alleges that the defendant has made enough to re-imburse him the said advances; and asks that he be compelled to discontinue, in fulfillment of his agreement, and that he be enjoined, in limine, from further manufacturing.

The answer, which was read as an affidavit, denies that the defendant has yet re-imbursed himself by manufacturing under the patent.

Whether the court will decree the specific performance of such an agreement, will be the question on the final hearing.

If it were palpable that the defendant had, by manufacturing under the patent, made enough to re-imburse him, it would not follow, necessarily, that the court would oblige him to discontinue, in fulfillment of his agreement. He owns a third of the patent, and has, therefore, a right to manufacture under it. The complainant, being the owner of the other two-thirds, has also a right to manufacture under the patent. Each would be accountable to the other for his proportion of the profits. It being, at least, uncertain whether a decree for the specific performance of such an agreement would be made, a preliminary injunction, which would compel an initiative performance of it, cannot be allowed.

It is evident that the difficulty between these parties lies beyond this. An injunction would probably not have been asked on the foregoing view of the case.

The real difficulty is, that the defendant denies that he is manufacturing under the patent, and claims that the article he is manufacturing is not within the patent, but is a different article.

ít is really, therefore, a question of infringement of a patent right.

Of such questions state courts have no jurisdiction,

Injunction denied.