#### WINCHESTER REPEATING ARMS COMPANY v. THE UNITED STATES.

[No. 31906.

Decided April 10, 1916.]

*On the proofs.*

Contract.—Plaintiff enters into two contracts with the United States to manufacture and deliver certain rifles. Said contracts were completed, the rifles delivered, and the contract price paid in full to the plaintiff. In the contracts and the specifications accompanying them there was a provision that the United States would hold the plaintiff company “ *harmless from any and all suits which may be brought against it for and on account of any alleged infringements of patents in the production of the rifles required.”*Thereafter a suit was instituted in the United States Circuit Court at Hartford, Conn., against the plaintiff, claiming an infringement in the manufacture of the rifles so manufactured and delivered. Plaintiff sues for a reimbursement of sums expended as attorneys’ fees and expenses.

*Indemnifying contract; patent; suit for*infringement.—Where in an indemnifying contract the defendants agree to hold “ *harmless*” the maufacturers against suits for patent infringement, it is an express covenant upon their part to assume all expenses incident to an attack by alleged patentees, and plaintiff was entitled to the full consideration of the contract undiminished by the cost of defending suits for infringement of patent. *Costs; liability of Government*for.—While the circuit court is powerless to allow attorneys’ fees as part of the costs in patent litigation, said costs were included in the express and independent agreement between the parties to hold hariS8|jj§Ífrom suits for infringement of patent, and said agreemenf'contemplated the whole course of legal procedure from beginning to end.

*The Reporter’s*statement of the case:

*Mr. Frank S. Bright*for the plaintiff. *Mr. Charles G. Phelps*was on the briefs.

*119
      *Mr. W. F.*Norris, with whom was *Mr. Assistant Attorney General Huston*Thompson, for the defendants:

That there can be no recovery for counsel fees in suits for infringement of a patent in the United States courts is a proposition that can not be disputed. *Oelrichs*v. Spain, 82 U. S., 211.

If claimant could not recover attorneys’ fees in the United States circuit court, upon what principle can he recover them in the United States Court of Claims ?

Had he filed a motion to retax costs so as to include attorneys’ fees and expenses, it would have been denied. He could not recover in the United States Supreme Court, and if the circuit court had allowed attorneys’ fees such ruling would have been reversed under the decision in the Oelrich case. If not allowed there, it should not be allowed here. Why should the Supreme Court reverse a judgment for attorneys’ fees in an action for the infringement of a patent in one of the Federal courts and sustain such judgment on an appeal from the Court of Claims, another Federal court? Can a party secure in one Federal jurisdiction what is denied in another Federal jurisdiction? Will the Supreme Court reverse in the one case and affirm in the other ? One uniform rule governs the Federal courts, and that rule is prescribed by the Supreme Court, and its decision is binding on all courts and should not be so construed that the claimant in one court succeeds and the claimant in another court fails.

“ The rule is well established in the Federal courts and in the courts of the Territories that attorneys’ fees are not recoverable as part of the damages occasioned by an injunction.” 15 Wall., 211.

Counsel fees were held not to be an element of damage in an action upon an undertaking given to procure an injunction in the case of *Frantz*v. Saylor, 12 Okla., 39; 69 Pac., 794.

The Supreme Court of Tennessee says, after discussing the rules of numerous courts:

“In the United States Supreme Court and the Federal courts such fees are not allowed. * * * It is difficult to see upon what ground counsel fees incurred by the adverse *120party should be charged up to the defeated party any more in attachment and injunction cases than in other litigations. * * * Counsel fees can not be allowed as a part of the expenses incurred in dissolving an injunction in the State of Tennessee.” *Stringfield*v. Hirsch, 94 Tenn, 425.

See also *Jones*v. *Rosedale Street Ry. Co.,*75 Texas, 382; *Smith*v. *Wilson,*91 *Ib.,*403; *Wisecarver*v. *Wisecarver,*97 Va., 452.

The general subject of the allowance of attorneys’ fees as a part of the costs in suits on provisional remedies, as well as the main action, is elaborately discussed in L. R. A., vol. 16 N. S., in footnotes to the case of *Littleton*v. *Burgess,*pages 49 to 77, from which defendant cites the above authorities. It is a recognized fact that there is a direct conflict between the courts of the several States on this subject. As remarked by the Tennessee court upon this question, there is an abundance of authority and conflict of decision in the courts of the several States and the Federal courts, the Tennessee court adopting the rule laid down by the Federal courts.

Booth, *Judge,*

reviewing the facts found to be established, delivered the opinion of the court.

The claimant company sues for reimbursement of expenses incurred in defending a certain suit against it, which, under the terms of an indemnifying contract with the defendants, it insists they are obligated to pay. The circumstances of the transaction are not in dispute. The claimant company, a manufacturer of firearms, entered into two contracts for the manufacture of a large number of Lee Straight Pull rifles. It was fully understood by both parties to the contract that its fulfillment necessarily involved the danger of a suit or suits for the infringement of a patent in the construction of the arms. The defendants, therefore, readily acceded to a stipulation in the contract by the express terms of which they agreed to hold the company harmless from such suit or suits. The claimant company had proceeded but a few months when the expected opposition developed, and a suit was commenced against it for an infringement of patent *121rights claimed under letters patent issued to Capt. Andrew H. Russell, U. S. A.

The litigation was extended and tedious, covering a period of time from November 11, 1898, to November 21, 1906. Immediately upon notice of the commencement of the suit the claimant company consulted its attorney, and after some preliminary proceedings the defendants were notified of the same. Without the repetition of many details, fully set forth in the findings, it is manifestly certain that the attorney selected in the first instance by the claimant company carried forward the arduous task of defending this suit with signal ability and industry. The defendants, through the Department of Justice, upon receipt of notice as to the pending patent controversy, notified the United States district attorney within the jurisdiction to appear and represent them. The district attorney at the time was not an experienced patent lawyer, and upon receipt of said notice immediately conferred with the claimant’s attorney and personally requested him to remain in the case. Thereafter, upon repeated occasions, both by personal contact and correspondence, the defendants ratified, confirmed, and acquiesced in the conduct of the claimant company in the premises, accepting its attorney of record as a full discharge of its duty under the contracts. At all times, from the inception to the close of the litigation, the defendants approved of the defense made, joined with the claimant’s attorney, and recognized and treated the entire course of proceeding as one distinctly made on behalf of the defendants by the claimant company to forestall a judgment for damages and costs which under the contracts the defendants would have had to pay. It was in legal effect simply saying to the claimant company, we adopt, approve, and accept the steps you have taken in the defense of the patent case, instead of pursuing an independent course or employing an attorney of our own. The defendants never at any time employed or designated a patent attorney to appear for or assist the claimant company in the conduct of the case.

The evidence, voluminous in extent, requiring years in its taking, was all taken by the claimant’s attorney, the briefs *122were prepared by him, all with the knowledge and consent of the defendants, and it would be difficult to conceive a more complete ratification of a duty done or services rendered under the relationship between the parties obtaining here than is apparent in this case. It was, in fact, as the record indisputably discloses, the rendering of a service by the claimant company which the defendants knew they were by the express terms of the indemnity clauses obligated to render and which they adopted and consented to under circumstances admitting liability therefor under the contracts. The defendants would have had to employ a patent lawyer and pay him for his services or suffer the penalty of judgment against the claimant for an infringement of a patent right. The menace was apparent, known and within the contemplation of the parties when the contracts were made. The defendants are presumed to know, and did know, the amount of expense involved in patent litigation in Federal courts, and when they employed the term *harmless*it had for its distinctive purpose and intention to save the full consideration of the contracts to and for the claimant company, the same as if they could have proceeded unembarrassed by any suit or suits.

In support of the above statement it is only necessary to emphasize the fact that after the filing of the demurrer to the bill the defendants were expressly notified that the claimant company’s interest in the litigation, in view of the indemnifying clauses of the contracts, was insignificant, and the defendants would thereafter be expected to make good their contract.

This suit is defended upon the theory that the liability of the defendants under the indemnifying clauses of the two contracts extends only to payment of the judgment for damages it was liable to incur and that such taxable costs as legally follow the determination of patent litigation, *i. e.,*outside expenses, including attorney’s fees, are not recoverable.

It seems to the court that the situation indispensable to the maintenance of the defense in this particular instance is lacking. Without going into the contrariety of opinion apparent from the decisions of the State courts, where the issue *123presented was between the obligor and obligee upon indemnifying bonds given in the course of judicial proceedings and necessary to invoke the machinery of the law, such as injunction, attachment bonds, etc., we think this case is clearly distinguishable therefrom.

The indemnity afforded in this case arises in virtue of a written contract, a distinct instrument between the parties, entirely disconnected from the litigation which followed in so far as any action of the court trying the case was concerned. The court in its judgment in favor of the claimant company was limited in its award to the taxation of such costs and expenses as legally appertain to the successful defense of a patent case. Entirely independent of the court’s action, oí the costs fixed by statute in such a case, the claimant company had a written contract with the defendants to save it harmless upon prompt notification of a pending suit or suits which might be brought against it. The total costs recovered by the company against the alleged patentee were paid by the latter, and the fact that this sum measured the full power of the court in the premises in no wise inhibits this court from applying the usual canons of construction to the contract involved in this case.

An indemnifying contract, like all other written agreements, is open to the ascertainment of the intention of the parties in executing the instrument and the scope and operation of the same. The circumstances of the transaction and the situation of the parties at the time the contract is made are all pertinent inquiries and alike effective in fixing responsibility under its express terms. (22 Cyc., 84.)

The claimant company prior to entering into the contracts in suit expressly forewarned the defendants that danger threatened it in executing the contracts on account of alleged patent rights. The defendants recognized the danger and with full knowledge of the situation agreed to save the company harmless from “ any and all suits,” not alone *harmless*from damages incurred, but the more comprehensive term, *amy and all suits.*That the defendants understood that the burden of defending all suits rested upon them is attested by the last clause—the stipulation imposing the obligation *124of immediate notice of their commencement. The specifications likewise publicly notified intending bidders that the Government would hold the contractor harmless from all patent infringement, and thereby induced the offering of the contract articles at a price without this anticipated expense in mind. In view of the findings, it is difficult to see the transaction in any other light than an open, intentional, and express covenant upon the part of the defendants to assume all expense incident to an attack upon the successful bidder by any and all alleged patentees.

The parties to the agreement were not indulging in technical construction of comprehensive terms; no thought occured to either that the word *harmless*had any other meaning than its usually accepted one, and no contractor would have entered into the contract upon the basis of reasonable prices if he knew at the beginning he was to incur the indeterminate expense of long and vexatious patent litigation, an expense that in point of fact in this case was imminent and certain to follow.

The claimant company under its contract was entitled to the full consideration for the undertakings undiminished by the defense of defending suit or suits for the infringement of a patent. The company manufactured the rifles with this fact clearly in view, and the defendants intended the contracts should be so understood.

It is said that the court in patent litigation is powerless to allow attorney’s fees as part of the costs of the proceedings. This is undoubtedly correct. *Oelrichs*v. Spain, 82 U. S., 211. The Federal court trying the case of Eussell against the claimant company could not and of course did' not allow attorney’s fees and expenses as part of the taxable costs. It does not follow, however, that they were not in the contemplation of the parties to an express and independent agreement to hold harmless from any and all suits for an infringement of a patent right. The claimant company was not contracting upon the narrow and technical basis of the legal extent of liability attaching to an unsuccessful litigant in a patent case. The defendants agreed upon notice to save it harmless, not from judgments, damages, or costs, but from *125
      *suit or*suits, the whole course of legal procedure from beginning to end. The defendants knew the claimant company in the event of suit or suits would be the indispensable party defendant to the patent case; they knew, or at least are presumed to have known, the limitations of recovery against the patentee in the event of failure to maintain his cause of action. Under what theory are we to indulge the presumption that the defendants having by their express contract placed the claimant company in this situation are then to be permitted to assert a limited liability under a clause to save harmless and thereby escape the payment of reasonable and proper expenses which they would have been compelled to pay had they instead of the claimant company been the named defendants to the patent case? The defendants wanted the rifles; they could not get them without running counter to alleged patent rights; they accepted the hazard, agreed to the conditions of the contracts of indemnity, do not deny the reasonableness of the charges here involved, and fully recognized the certainty of their existence.

Judgment will be awarded claimant company in the sum of $12,446.90.

It is so ordered.

Downey, Judge, was absent and took no part in the decision of this case.