The Washington herald., 1911-02-22
ROYALTIES DENIED
TO INVENTOR SMITH
EnjOined from Asserting His
Contract Rights.
JUSTICE GOULD GIVES RULING
UphOIds Petition of the American
GraphOphOnc Company, but Further
duction of "SOund Records" and
improvements Need Not BE Repaid.

IN the case or the American Graphic
phone Company against William Herbert
Smith, to enjon the latter from prose
cutting a suit upon a contract entered
into between these parties and to re-
scind the same, Justice Gould yesterday
held in his decision that Smith be en-
Joined from asserting any rights under
| the contract to royalties, and that his
prayer be denied. The court further
held that it would be ineQuitable to require
Smith to repay the Graphophone Company
| the sum Of 5000, and a further sum
spent by the company in attempting 10
perfect certain process, the total
amounting to approximately $1,000
The bill setting forth the case alleges
| that Smith was a director OF the COM
pany from April, 1895. to April, 1SO3 and
was specially charged with the supervi-
| sion OF the business in respect of the
production of sound records and the
improvements thereof, being paid sal
ary of $500 for several years
1t is further alleged thar prior to June,
1899, Smith became financially interested
in another invention, which had for its
object the production OF permanent mas
ter records" and tnat Smith, upon his
representation that this invention was
valuable when perfected. entered into a
contract with the company, giving it the
right 10 purchase from him and his as
sociates the invention for 5000 cash and
royalty Of l cent upon each record made
by the users OF the invention. The bill
AYERS that it was Smiths duty TO safe
guard the interests Of the company in
respect Of this invention; that he was
paid by the company for work performed
in connection with the invention. and that
the Via fYIII in
him
In January. 1900. Smith. it is alleged.
represented that the process had been
perfected and that the company take over
the same. Relying upon his representa-
tions, the company paid the 5000 named
in the contract and transferred the Oper-
ations connected with the commercial use
of the process to its factory and put it
under his supervision. but that it was
found that the master records made by
the process were worthless
In his answer, Smith denied that the
company believed him to be acting in its
interests. but that it knew he was act
ing as his own representative and as that
OF the two inventors. Smith also denies
all representations respecting the prac-
ticability f the invention, and alleges
that the complainant company does not
come into court with clean hands"
Could Not Serve Two Masters.
Discussing the duties of officers Of
companies and with special reference to
Mr. Smith, Justice Gould stated that
Smith was not only a director OF. and
therefore trustee, for the Graphophone
Company. but he was especially charged
with the duty of supervising that branch
OF its business which pertained to the
subject matter Of the contract in contro-
Versy. Upon the discovery of an inven-
ton, which could benefit his trust, it be-
came his duty to secure it for his bene-
ficiary. He was in no position TO do his
full duty to his trust, and at the same
time make Il profit for himself. He
could not serve two masters. In the re-
lation which he (Smith) occupied to the
company, an innocent misrepresentation
even when it was 4 matter of opinion,
would warrant the interpOsition of a
court of equity TO prevent the enforce
ment of a contract resulting therefrom;
and the same result would follow his
negligent failure to make a proper in
vestigatiOn in a matter connected with
the administration of his trust