Case Name: Smith A. Skinner, Resp't, v. The Walter A. Wood Mowing & Reaping Machine Co., App'lt
Court: New York Court of Appeals
Jurisdiction: New York
Decision Date: 1893-11-28
Citations: 55 N.Y. St. Rep. 568
Docket Number: 
Parties: Smith A. Skinner, Resp’t, v. The Walter A. Wood Mowing & Reaping Machine Co., App’lt.
Judges: 
Reporter: New York State Reporter
Volume: 55
Pages: 568–571

Head Matter:
Smith A. Skinner, Resp’t, v. The Walter A. Wood Mowing & Reaping Machine Co., App’lt.
(Court of Appeals,
Filed November 28, 1893.)
1. Contract—Bar.
By a contract between the parties to this action it was agreed, on the part of the plaintiff, that defendant should have the exclusive right of using an oiler, plaintiff’s invention, on its mowing and reaping machines, and on the part of defendant, that it would use the oiler upon its said machines and would pay plaintiff the reasonable value of such use. Held, that the contract established substantially the relation of licensor and licensee of a patented invention, and that plaint ff’s cause of action to recover compensation was not entire, so that one judgment would exhaust the whole right of action on the contract.
3. Patents—Licensee cannot question validity of patent.
A licensee, while he remains such, cannot question or dispute the validity of the patent, but in order to do so he must fully renounce its protection, and put himself in the clear and unmistakable attitude of an infringer, having no defense except in the claimed invalidity of the patent.
3. Same—Sufficiency of notice.
Plaintiff presented a claim for royalties, which was rejected by defendant’s auditing board on the ground that they believed the patent to be invalid, and notice thereof given to plaintiff, but no ground on which such invalidity was asserted was stated. Two years later another claim was rejected by the auditing board on the same ground, and notice given, and again no ground of invalidity was slated. Reid, that the notices were insufficient to show that defendant renounced the protection of the patent and abandoned the position of licensee, and that it remained liable as such.
4. Same—Power of auditing board of corporation.
In the absence of proof that the auditing board had power to rescind contracts and settle and determine the future action of the company, it must be held that such power resided only in the board of trustees, and as such board had not acted in the matter, the notices were also insufficient because they did not emanate from the competent authority.
Appeal from judgment of the supreme court, general term, third department, affirming judgment in favor of plaintiff, entered upon the report of a referee.
Esek Cowen, for app’lt; James Lansing, for resp’t.

Opinion:
Finch, J.
We deem it our duty to affirm the judgment upon two of the propositions asserted by the general term, but without any further expression of opinion as to other matters which were brought into the discussion.
We agree that the contract between the parties established substantially the relation of licensor and licensee of a patented invention, and that the plaintiff's cause of action to recover compensation was not entire, so that the one judgment previously obtained exhausted the whole right of action upon the contract, but was and is in the nature of a demand for royalties, dependent upon the number of machines manufactured to which the invention was applied, and measured by the value of the use to which the latter was thus subjected. The question was fully discussed in the opinion below, and our approval of its reasoning upon the point remains unchanged by the appellant's criticism on the argument. The terms of the contract itself, its peculiar subject-matter, and the conduct of the parties under it, all indicate that the cause of action was not entire and complete upon the execution of the agreement, but that the latter contemplated compensation measured by future use, and giving rise to causes of action severally founded upon subsequent breaches. While the contract as proved lacks the precision and accuracy of detail which would have excluded the question raised, enough is left to justify the construction thus far maintained.
The further contention of the appellant is rested upon the theory that at a period antecedent to the use of the invention for which a recovery has been had, notice was given to the plaintiff that the defendant company renounced their license and refused to further manufacture under it, but should manufacture in the future in hostility to and defiance of the patent, on the ground that the latter was invalid and a nullity. It is conceded that a licensee may thus change his position ; that while he remains such he cannot question or dispute the yalidity of the patent, but in order to do so must fully renounce its protection, and put himself in the clear and unmistakable attitude of an infringer, having no defense except in the claimed invalidity of the patent. And the inquiry now is, whether any such sufficient notice was given.
The referee has found that about August 1, 1880, the plaintiff demanded payment for the use of his invention up to that date; that the claim was presented to the auditing board of' the company and was rejected by its members, though without any formal vote or resolution; the reason assigned being that the president of the company denied having made any contract with plaintiff, and that they believed the patent to be invalid. They also requested Mr. Parsons, who was the attorney of the company, to notify the plaintiff of their conclusion, and the latter did so, but without stating any grounds upon which the invalidity of the patent was asserted.
The referee further finds that in June of the year 1882 the plaintiff renewed his application for payment, and did so in a writing which was proved and put in evidence. In that docu ment he asserts that there had been a reissue of his patent; that whether valid or not it had up to that time served to protect the company in the use of the invention which they had applied to their machines as a patented article of which they had the exclusive use, and were in the habit of so representing the facts to the public; and that he desired to effect an arrangement for his compensation. This paper was presented by Parsons to the auditing committee, he adding at the foot of it, " The whole matter seems to depend on his contract with Mr. Wood, if he had one." The referee further finds that the auditing board again rejected the claim, and a majority of the individual members requested Parsons to so inform the plaintiff, because they believed the patent to be invalid, which the attorney did, though again without specifying the alleged ground of invalidity.
Several facts'about these notices challenge our attention. They are a refusal to pay, and give as a principal reason the asserted invalidity of the patent. But they do not in terms renounce its protection; they do not directly or explicitly abandon the position of licensees; they do not assert an intention to continue the manufacture in hostility to the patent and in defiance of its authority. All that can be said is that something of that sort might fairly be inferred from the refusal to pajq coupled with a claim of invalidity. While that is a possible, it is not a necessary inference, and the licensor was entitled to a distinct and definite and unequivocal notice, such as would leave the company inevitably liable as an infringer if the patent should be sustained. It is quite doubtful whether the defendant intended to take any such position or the plaintiff at all so understood it. Before the notice of 1880 there had been a use of the machine under the patent, and it was for that use that claim was made.
The refusal to pay, so far as it rested upon an asserted invalidity of the patent, could only mean that the company deemed that a defense although they were and remained licensees. They could not mean anything else, for there is no pretense that prior to that date any notice at all had been given. If at that time the defendant claimed, as it did, that the invalidity of the patent could justify a refusal to pay while the company was licensee, how could plaintiff be expected to infer that the licensee intended to cease to be such or manufacture on any different basis ? That the plaintiff did not and was not bound to so infer is evident from what followed. About two years later he again presented a claim for compensation. That the company for that period were chargeable only as infringers and oütside of the license does not seem to have entered his mind. On the contrary, he distinctly asserts that up to that very moment the licensees had been manufacturing as such, and so holding themselves out to the public, and he renews his claim on that basis. And now observe the action of the auditing board and their attorney. ' If they believed that two years earlier they had renounced their position as licensees, we should expect them to say so and tell the plaintiff if he had faith in his patent to proceed against them as infringers for two years at least. They say nothing of the kind. They merely repeat their refusal and assertion of the invalidity of the patent, without one word indicating any intended or accomplished change of position. Their own attorney appends to plaintiff's claim a written memorandum that it depends upon the question whether there was in fact a contract with Wood, and so recognizes that if there was there had been no infringement. And it is further to be noted that in a previous suit for royalties accruing after as well as before these notices were given, they were not pleaded as a defense against a recovery after their date founded upon an invalidity of the patent
There is a further difficulty. We may perhaps assume that the defendant's auditing board were vested with authority to pay or reject claims against the company, but we can assume nothing more than that. Ho proof is given of any authority conferred upon them beyond the usual functions involved in their official designation. It is not proved that they had any authority to rescind a contract or settle and determine the future action of the company. In the absence of such authority it must be held to reside in the board of trustees, which never acted upon the matter, either formally or informally.
A licensor is entitled to assume that his licensee remains such until the latter, by a clear, definite and unequivocal notice emanating from lawful and competent authority, throws off the protection of the license and stands admittedly an infringer if the patent is valid. The licensor is not to be left in a doubtful or uncertain position. He must not be exposed to the double danger of being defeated in a suit for infringement by a plea of license never effectually^ or authoritatively renounced; or if he sues for royalties, of being beaten because there was merely an infringement, if anything.
We think the alleged notices were insufficient, and so the defendant remained liable as licensee.
The judgment should be affirmed, with costs.
All concur, except Peckham, J., not sitting.
Affirming 47 St. Rep., 506.