Case Name: Johnson v. Union Switch & Signal Co.
Court: New York Superior Court
Jurisdiction: New York
Decision Date: 1890-04-07
Citations: 9 N.Y.S. 655
Docket Number: 
Parties: Johnson v. Union Switch & Signal Co.
Judges: 
Reporter: West's New York Supplement
Volume: 9
Pages: 655–659

Head Matter:
Johnson v. Union Switch & Signal Co.
(Superior Court of New York City, General Term.
April 7, 1890.)
' CoriBACTs—Construction—Purchase on Paten--Rights.
Plaintiff, who owned certain patents useful in the defendant company’s business, made a contract, which, after reciting that plaintiff “has licensed the company to use certain inventions, ” provided that plaintiff “grants, sells, and conveys” to defendant “the exclusive right, except as hereinafter provided, to the use of all the inventions, ” defendant agreeing to pay for such use an annual sum, and to employ plaintiff on a salary; the contract to continue for 10 years, subject to determination by either party on notice. The contract then provided: “It is further mutually covenanted and agreed that, in the event of the termination of this agreement, the said company, by reason of the expenditures that shall have been made during the continuance of this agreement, shall have a license, not exclusive, to use all of the inventions * * * on payment of * * *, and shall be entitled to purchase * * * the exclusive right to use’’them. Held, that the contract did not provide for an executed license after termination of the agreement, but for an option, of which defendant might avail itself on payment of the stipulated sum.
2. Same—Action—Pleading.
In an action on such contract, after its termination, for money alleged to be due from defendant for use of the patents after such termination, a complaint, which does not allege that defendant exercised such option and used the patents is demurrable.
Ingraham, J., dissenting.
Appeal from special term.
Action by Charles B. Johnson against the Union Switch & Signal Company. The complaint alleged that in September, 1886, a contract was entered into between plaintiff and defendant whereby it was agreed as follows:
“Whereas, by various agreements now in force between the Union Switch and Signal Company and Charles R. Johnson, said Johnson acts as the signal engineer of the said company, makes contracts to erect the interlocking apparatus, and has, over and above his salary, a portion of the profits as compensation, and has licensed the company to use certain inventions necessary in connection with the interlocking business, all of which agreements are to terminate on the 30th day of June, 1888, or as soon thereafter as present contracts are completed; and whereas, in lieu of these agreements above terminated, a new agreement lias been determined upon, now, to evidence the same, this memorandum of agreement between said Union Switch and Signal Company, party of the first part, and Charles B. Johnson, party of the second part, witnesseth as follows: First. Said Charles B. Johnson is hereby appointed general manager of the said company, * * * Third. Said Charles B. Johnson hereby grants, sells, and conveys to the said company the exclusive right, except as hereinafter provided, to the use of all the inventions that he, said Johnson, now has, relating to the signal business, or that, he may hereafter make or acquire, and also the right to use the present inventions of Mr. Henry Johnson relating to signals and switches, and any others which he may hereafter make, including all which the said Charles B. Johnson has acquired, or may hereafter so acquire. Fourth. Said company hereby covenants and agrees to pay for the use of the said inventions the sum of three thousand dollars per annum, settlements to be made quarterly. Fifth. Said company further hereby agrees to the employment of Mr. Henry Johnson as manager of the company’s works, so long as he shall prove entirely satisfactory to the general manager or the vice-president, at a salary at the rate of four thousand dollars per annum. Sixth. Said company further hereby agrees to pay to said Charles B. Johnson, in addition to the aforesaid compensation for patents and salary, a sum equal to ten per cent, of the net profits of the company, after having provided for all the expenses of the operation of the company. * * * Seventh. It is mutually agreed that this contract shall continue for a period of ten years, subject to termination by either party, however, by one year’s notice, in writing, to the other party, at any time after the second year, or by the death of Charles B. Johnson, or by his permanent inability to perform his duties as general manager. Eighth. It is further mutually covenanted and agreed that, in the event of the termination of this agreement, the said company, by reason of the expenditures that shall have been made during the continuance of this agreement, shall have a license, not exclusive, to use all of the inventions that may have been used in carrying on the business of the company on the payment of sixty-five hundred dollars per year, said sum to be paid quarterly, and shall be entitled to purchase from the said Charles B. Johnson or the executors, the exclusive right to use all of the inventions upon as favorable terms as he or his executors may be willing to grant to any other parties.”
The complaint further alleged that said contract continued in/ existence, and was acted upon by both parties, down to the 1st day of March, 1888, when it was terminated by defendant, and plaintiff was notified by defendant to that effect, and that his services would be no longer accepted after March 1, 1888; that, under the contract, there was due to plaintiff on the 1st of December, 1888, as royalties to be paid by said contract by defendant to plaintiff, the sum of $1,625, being for one quarterly payment extending from the 1st of September to the 1st of December, 1888, at the rate of $6,500 per year; that the said patents or inventions so owned or controlled by the said Charles-B. Johnson, and referred to in said contract and in this complaint, were and are as follows:
Interlocking machine, United States patent Ho. 317,137
Selector, ------- 342,911
Switch-bar locking movement, - - - - 358,933
Signal movement from drawbridge, - 361.419
361.420
372,539 Crank stand, -------
377,430 Motion plate clip, -----
309,627 Liquid compensator, - ...
334,232 Signal slot, ------
Plaintiff demanded judgment against defendant for the sum of $1,625, with interest from December 1, 1888, and costs. Defendant demurred to the complaint on the ground that it did not state facts sufficient to constitute a cause of action. The demurrer was sustained. Plaintiff appeals.
Argued before Sedgwick, C. J., and Freedman and Ingraham, JJ.
Miller & Savage, for appellant. Carter, Hughes & Cravath, for respondent.

Opinion:
Freedman, J.
In construing the contract between the parties as a whole, the eighth section must be held to provide, not for an executed license, but for an option, of which the defendant may avail itself upon paying a mentioned sum. The fact that no time is fixed anywhere for the continuation of the so-called "non-exclusive license" imperatively calls for that conclusion, under all the circumstances. There is no indication anywhere that it was the intention of the parties that the license should continue for the time the contract would have run, if it had not been terminated; and there is no logical connection between the duration of the license and the time fixed for the duration of the contract. In fact, the license was not to come into existence until after the termination of the contract. Another difficulty is that there are quite a number of patents, issued at widely-different times, and which, consequently, will expire at widely-different times, and that, in the absence of everything showing a meeting of minds as to a certain period, it is not reasonable to suppose that the defendant agreed to pay $6,500 per year until the expiration of the patent last issued. The most reasonable construction is that section 8 gave to the defendant merely the option to use the patents on the payment of the sum of $6,500 per year, and that the time during which such use and such license were to continue was left for future consideration and negotiation. There being no express or implied promise to pay the $6,500 per year, and no ground for implying one, the plaintiff was bound to show in his complaint that the defendant exercised the option and used the patents, or some of them. The judgment and order should be affirmed, with costs.