Source: https://caselaw.findlaw.com/us-supreme-court/261/24.html
Timestamp: 2019-04-24 06:58:48+00:00

Document:
This was a bill in equity filed in the United States District Court for the Northern District of Illinois by the Nye Tool & Machine Works, a corporation of Illinois, having its place of business in Chicago, against the Crown Die [261 U.S. 24, 25] & Tool Company, a corporation of the same state and doing business in the same city. The plaintiff sought to enjoin the infringement of a patent for a machine for forming screw-thread cutting devices, and for an accounting of profits and for damages. The inventors were Wright & Hubbard, and the patent issued to their assignee, the Reed Manufacturing Company of Pennsylvania.
Whereas, Nye Tool & Machine Works is desirous of acquiring from Reed Manufacturing Company all of its rights of exclusion under said patent, so far as the same may be exercised against the Crown Die & Tool Company, together with all rights of the Reed Manufacturing Company against the Crown Die & Tool Company arising out of the infringement aforesaid: [261 U.S. 24, 26] Now, therefore, in consideration of one thousand dollars ($1,000.00), and other good and valuable considerations, the receipt of which is hereby acknowledged, the Reed Manufacturing Company hereby assigns and sets over to the Nye Tool & Machine Works all claims recoverable in law or in equity, whether for damages, profits, savings, or any other kind or description which the Reed Manufacturing Company has against the Crown Die & Tool Company arising out of the infringement by the Crown Die & Tool Company of the Wright & Hubbard patent, No. 1,033,142, and for the same consideration assigns and sets over all the rights which it now has arising from said patent of excluding the Crown Die & Tool Company from the practice of the invention of said patent, the intention being that, in so far as concerns the exclusion of the Crown Die & Tool Company under said patent, the Nye Tool & Machine Works shall be vested with as full rights in the premises as the Reed Manufacturing Company would have had had this assignment not been made, and that the Nye Tool & Machine Works shall have the full right to bring suit on said patent, either at law or in equity against said Crown Die & Tool ompany, and for its own benefit, to exclude the Crown Die & Tool Company from practicing the invention of said patent, and for its own use and benefit to collect damages which may arise by reason of the future infringement of said patent by the Crown Die & Tool Company, but nothing herein contained shall in any way affect or alter the rights of the Reed Manufacturing Company against other than the Crown Die & Tool Company, and for the same consideration all rights as are herein given against the Crown Die & Tool Company are given as asainst any successor or assignee of the business thereof.
1. That the bill of complaint states an alleged cause of action arising out of the assumed infringement of a patent in which plaintiff has no title, and prays an injunction, and accounting and damages.
2. That the owner of the entire or any part of the legal title to the patent sued on is not made a party to the suit.
3. That the legal effect of the alleged assignment set up as the basis of this cause of action and forming part of the bill of complaint herein is contrary to the statutes covering suits for infringement of patents, and shows on its face that the plaintiff has no interest in the patent sued on.
4. That the bill of complaint herein, including the alleged assignment, evidences a conspiracy against this defendant by the parties to the document identified as 'Exhibit A,' in which the plaintiff and the Reed Manufacturing Company assumed the function of the court in having already decreed that this defendant infringes patent No. 1,033,142, and now seeks to utilize this court to annoy and harass the Crown Die & Tool Company by instituting legal proceedings when no right of action exists.
5. That 'Exhibit A' attached to the bill of complaint in this case purports only to convey to plaintiff all claims recoverable in law or in equity which the Reed Manufacturing Company may have against the Crown Die & Tool Company, over which subject-matter this court has no jurisdiction.
6. Prior suit pending, between the same parties in this court, decision of which will determine any questions involved in this case. [261 U.S. 24, 28] Therefore this defendant respectfully moves the court to dismiss said bill of complaint with its reasonable costs and charges in its behalf most wrongfully sustained.
By Florence King, Solicitor for Defendant.
The District Judge in the interest of expedition granted the motion to dismiss, in order that the main question, i. e., the plaintiff's right to sue might be determined by the Circuit Court of Appeals before the expense of an accounting should be incurred, although he thought the plaintiff had acquired the right under the instrument 270 Fed. 587. The Circuit Court of Appeals reversed the decree of dismissal, holding the instrument to be a valid assignment of an interest in the patent conferring the right to sue and remanded the cause to the District Court for an accounting and further proceedings. 276 Fed. 376.
Although the decree of the Circuit Court of Appeals is not final the importance of the question involved and the possible saving of useless litigation led this court to grant the writ of certiorari before further proceedings in the District Court.
Miss Florence King, of Chicago, Ill., for petitioner.
Mr. Russell Wiles, of Chicago, Ill., for respondent.
The petitioner raises a question of jurisdiction. It says that the suit does not arise under the patent laws of the United States, but is merely a suit on a contract like one for royalties under a license of which the Di trict Court could not have jurisdiction because the parties are both citizens of the same state. To sustain this argument are cited Albright v. Teas, 106 U.S. 613 , 1 Sup. Ct. 550; Pratt v. Paris Gaslight Co., 168 U.S. 255 , 18 Sup. Ct. 62; and Excelsior Wooden Pipe Co. v. Pacific Bridge Co., 185 U.S. 282 , 22 Sup. Ct. 681. The cases have no application and the point is without merit. The bill in this case is based on an assignment of a patent claimed to be valid under the statutes of the United States, and asking the protection of the patent right thus assigned by injunction and an accounting. It therefore involves the validity of the assignment of a patent, which is a question arising under the patent laws because it depends upon their construction, and if the assignment is valid, the suit is just an ordinary suit for injunction and profits dependent on the validity of the patent and its infringement under those same laws. There is no question of royalties by contract in the case.
The main question is an interesting one. The argument of counsel for the respondent and the one upon which the Circuit Court of Appeals proceeded to its conclusion [261 U.S. 24, 34] is that the right which the patentee derives from the government by its grant is not the right to make, use and vend; that such a right is a so- called natural right, not dependent on statute, but arises under the common law, and has no peculiar federal source or protection other than any other right of liberty or property. All that the government grants and protects is the power to exclude others from making, using, or vending during the grant of 17 years. Under the patent law, section 4898, R. S. ( Comp. St. 9444), a patentee may assign by an instrument in writing his patent or any interest therein. It is argued that, as the patent is only the power to exclude all from making, using and vending, the power to exclude some particular person from doing so is a part of that power of exactly the same nature, and therefore is a definite interest in the patent that can be assigned.
The analysis of the rights which a patentee acquires under the grant is sustained by a line of authorities. Bloomer v. McQuewan, 14 How. 539, 548; Patterson v. Kentucky, 97 U.S. 501 ; United States v. Bell Telephone Co., 167 U.S. 224, 249 , 17 S. Sup. Ct. 809; Bement v. National Harrow Co., 186 U.S. 70, 90 , 22 S. Sup. Ct. 747; Continental Paper Bag Co. v. Eastern Paper Bag Co., 210 U.S. 405 , 28 Sup. Ct. 748; Heaton Peninsular Co. v. Eureka Specialty Co., 77 Fed. 288, 294, 25 C. C. A. 267, 35 L. R. A. 728; Fuller v. Berger, 120 Fed. 274, 56 C. C. A. 588, 65 L. R. A. 381. The fullest and most satisfactory discussion of the subject is found in the Continental Paper Bag Co. v. Eastern Paper Bag Co., supra. In that case it was sought to defeat a suit by a patent owner for infringement of a patent on the ground that he was not entitled to ask a court of equity to aid him in protecting the grant of the patent to him by the government because he had failed and neglected ever to use the patent himself or to allow anybody else to do so, and therefore had not rendered to the public the benefit and consideration for which the patent was granted. This court held that the benefit which the government intended to secure was not the [261 U.S. 24, 35] making or use of the patent for the benefit of the public during the 17 years of the grant. except as the patentee might voluntarily confer it from motives of gain, but only the benefit of its public use after the grant expired. The court held that the government did not confer on the patentee the right himself to make, use or vend his own invention, that such right was a right under the common law, not arising under the federal patent laws, and not within the grant of power to Congress to enact such laws, and that, in the absence of the express statutory imposition upon the patentee of the obligation to ake, use or vend his patented invention as a condition of receiving his patent, it would not be implied. The court further held that in its essence all that the government conferred by the patent was the right to exclude others from making, using or vending his invention.
We do not think, however, that these clearly established principles sustain the next step in the reasoning of the counsel for the respondent and the Circuit Court of Appeals which is that they make the mere right to exclude persons from the making, using and vending of an invention such an interest in a patent that it can be assigned. It ignores the indispensable condition of the granting and establishment of a patent right and patent property that the patentee shall have himself the common-law right of making, using and vending the invention. The sole reason and purpose of the constitutional grant to Congress to enact patent laws is to promote the progress of science and useful arts by securing for limited times to inventors the exclusive right to their respective discoveries. Article 1, 8, cl. 8. In pursuance thereof, section 4886, R. S., as amended, 29 Stat. 692 (Comp. St. 9430), provides that any person who has invented or discovered any new and useful art, machine, manufacture or composition of matter, or any new or useful improvements thereof, upon certain conditions not important here, may obtain a patent [261 U.S. 24, 36] therefor. Section 4884, R. S. (Comp. St. 9428), directs that the grant of a patent shall be to the patentee, his heirs or assigns, for the term of 17 years of the exclusive right to make, use and vend the invention or discovery throughout the United States. An inventor may in writing assign his invention and the right to a patent before the patent is granted, and under section 4895, R. S. (Comp. St. 9439), a patent will issue to the assignee. Can it be claimed that an assignment of the right to exclude all from making, using and vending and excepting therefrom the right to make, use and vend in the assignee, would be such an assignment as would justify the Patent Office in issuing the patent under the statute to the assignee? Yet if all that there is in a patent property is the bare right to exclude others from making, using or vending something, the patent should issue in such a case.
The error in the position of the respondent and the court below is in a failure to distinguish between the property or title or interest in a patent capable of assignment and the chief incident of that property, title or interest, an incident which can only pass by assignment when attached to the right to make, use and vend. It is the fact that the patentee has invented or discovered something useful and thus has the common-law right to make, use and vend it himself which induces the government to clothe him with power to exclude every one else from making, using or vending it. In other words, the patent confers on such common-law right the incident of exclusive enjoyment and it is the common-law right with this incident which a patentee or an assignee must have. That is the implication of the descriptive words of the grant 'the exclusive right to make, use and vend the invention.' The government is not granting the common-law right to make, use and vend, but it is granting the incident of exclusive ownership of that common-law right, which can not be enjoyed save with the common-law right. [261 U.S. 24, 37] A patent confers a monopoly. So this court has decided in the Paper Bag Case, supra, and in many other cases. The idea of monopoly held by one in making, using and vending connotes the right in him to do that thing from which he excludes others.
In Gayler v. Wilder, 10 How. 477, it was held that the grant of an exclusive right to make and vend an article within a certain territory upon paying to the assignor a cent per pound, reserving to the assignor the right to use and manufacture the article by paying the assignee a cent per pound, was only a license, and that a suit for the infringement of the patent right must be brought in the name of the assignor. The effect of the opinion in that case is that the monopoly granted the patentee is for one entire thing and in order to enable an assignee to sue he must have received the entire and unqualified monopoly in the territory specified. Chief Justice Taney's reason for this (10 How. 494) is useful in this case. 'For,' said he, 'it was obviously not the intention of the Legislature to permit several monopolies to be made out of one, and divided among different persons within the same limits. Such a division would inevitably lead to fraudulent impositions upon persons who desired to purchase the use of the improvement, and would subject a party who, under a mistake as to his rights, used the invention without authority, to be harassed by a multiplicity of suits instead of one, and to successive recoveries of damages by different persons holding different portions of the patent right in the same place.' See also Pope Manufacturing Co. v. Gormully Manufacturing Company, 144 U.S. 238, 250 , 12 S. Sup. Ct. 637.
These cases do not present the same facts as the one before us; but they indicate clearly what view the courts deciding them would have taken of an effort like that in the case at bar to divide up the monopoly of patent property [261 U.S. 24, 39] so that the patentee retains the right to make, use and vend, but gives to many different individuals the right to sue certain named infringers, respectively, and that with the sole motive of harassing them such as is avowed in the recitals of the instrument before us. If held legal, it would give the patentee an opportunity without expense to himself to stir up litigation by third persons that is certainly contrary to the purpose and spirit of the statutory provisions for the assigning of patents.
Nor do we think that the principle of Patterson v. Kentucky, 7 U.S. 501 , or the instance of a patent for an improvement on a machine, patent for which is held by another, involves anything inconsistent with our conclusion that the right to exclude others conferred in a patent can only be conferred upon one who has the common- law right to use, make and vend. In Patterson v. Kentucky, the patentee had the common-law right to make, use and vend, but the state of Kentucky exercising her lawful police power restricted him in it. In the case of the patentee for improvement on a patented machine, the patentee has the right to make, use and vend the improvement, but he cannot make it profitable or useful unless he can secure the right to put it onto another machine.
For the reasons given, we think the attempted assignment in this case carried no part of the title to the patent or interest in it and therefore conferred no right to sue for damages for infringement of the patent after the execution of the instrument.
The remaining question is whether the instrument relied on by the plaintiff below gave it the right to sue in its own name in this case for damages for past infringements. We think not.
The plaintiff below could not bring such a suit for past infringements without joining with it the owner of the [261 U.S. 24, 40] patent when the infringements were committed. It is said that the claim of an owner of a patent for damages for infringement is only a chose in action which in modern days may be so assigned that the assignee acquires full title and the right to sue at law as well as in equity without joining his assignor. This view ignores the peculiar character of patent property and the recognized rules for the transfer of its ownership and its incidents. Patent property is the creature of statute law and its incidents are equally so and depend upon the construction to be given to the statutes creating it and them, in view of the policy of Congress in their enactment. This is shown by the opinion of this Court in Waterman v. MacKenzie, 138 U.S. 252 , 11 Sup. Ct. 334, already cited, and in the line of authorities followed therein. It is not safe, therefore, in dealing with a transfer of rights under the patent law to follow implicitly the rules governing a transfer of rights in a chose in action at common law.
The neat issue in that case was whether 'the name or names of the person or persons interested' meant the person interested when the infringement took place or when the suit was brought. The court held that it meant the person who was patentee, assignee, or grantee when [261 U.S. 24, 42] the infringement occurred and the cause of action accrued. The court held, therefore, that the proper plaintiff in a suit for past infringements was not the present owner of the patent, and that he did not acquire the right to bring suits for prior infringements merely by the conveyance of the full title to the patent and its enjoyment. This case was followed by that of Gordon v. Anthony, on the circuit reported in 16 Blatchf. 234, 10 Fed. Cas. 773, No. 5605. The decision was by Blatchford, Circuit Judge of the Second Circuit, who had been District Judge, and who subsequently became a justice of this court and had great experience in the administration of the patent law.
See, also, Ball v. Coker (C. C.) 168 Fed. 304, 307.
Counsel for plaintiff cites Hayward v. Andrews (C. C.) 12 Fed. 786, to maintain the contrary and to sustain the right of the assignee of claims for past infringements to maintain suit. The case cited is not in point, the assignee in that case held the legal title to the patent.
The sole exception to the rule that only he who is the owner of th patent at the time of the infringement can sue for damages to which Professor Robinson refers is when such owner assigns the patent and also the claim for past infringements to the same person. In such a case, as the title and ownership of the claims are united, it is held that the owner may sue. Dibble v. Augur, 7 Blatchf. 86, 7 Fed. Cas. 642, No. 3,879; Hamilton v. Rollins, 5 Dill. 495, 11 Fed. Cas. 364, No. 5,988; Henry v. Francestown Soapstone Stove Co., 2 Ban. & A. 221, 11 Fed. Cas. 1180, No. 6, 382; Consolidated Oil Well Packer Co. v. Eaton, Cole & Burnham Co. (C. C.) 12 Fed. 865, 870; Spring v. Domestic Sewing Machine Co. (C. C.) 13 Fed. 446, 449; Nellis v. Pennock Mfg. Co. (C. C.) 38 Fed. 379. Under this exception, therefore, if the instrument here relied on had been effective to make the plaintiff an assignee or grantee of the patent or 'of any interest therein' within the meaning of section 4898, R. S., as amended, then the plaintiff could have maintained this action for damages for infringements prior to the execution of the instrument; but, as we hold, the instrument did not have this effect.
But it is urged that under equity rule 37 (33 Sup. Ct. xxviii) every action [261 U.S. 24, 44] must be prosecuted in the name of the real party in interest, and therefore, as the plaintiff is the beneficial owner of the claims for past infringements, it should be permitted to sue in a court of equity. The equity rule was not intended to set aside a policy and rule having its source in the patent statutes and cannot affect this case. The rule laid down by Circuit Judge Blatchford in Gordon v. Anthony, supra, applied to both actions in equity and law, and grew out of the sections of statutes quoted by him and not since amended. Both at law and in equity, either the owner of the patent at the time of the past infringement, or the subsequent owner of the patent who is at the same time the assignee of the claims for past infringement, must be a party to a suit for damages for the past infringement. If the owner of the patent when the infringements took place has assigned his patent to one, and his claims for damages for infringement to another, then the latter cannot sue at law at all but must compel his assignor of the claims to sue for him. In equity both such assignor and the assignee who is the real party in interest must join as plaintiffs. Such assignor is a necessary party and a bill for accounting and damages is fatally defective otherwise. Robinson, vol. 3, 1099; Dibble v. Augur, 7 Blatchf. 86, 7 Fed. Cas. 642, No. 3,879; Gamewell Fire Alarm Telegraph Co. v. City of Brooklyn (C. C.) 14 Fed. 255; Ball v. Coker ( C. C.) 168 Fed. 304. As the owner of the patent is not a party to this bill, the result is that on no ground can the bill of the plaintiff be sustained and that the motion to dismiss should have been granted.

References: v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v.