Case Name: Charles R. Johnson, App'lt, v. The Union Switch & Signal Co., Resp't
Court: New York Superior Court
Jurisdiction: New York
Decision Date: 1890-04-07
Citations: 30 N.Y. St. Rep. 806
Docket Number: 
Parties: Charles R. Johnson, App’lt, v. The Union Switch & Signal Co., Resp’t.
Judges: 
Reporter: New York State Reporter
Volume: 30
Pages: 806–809

Head Matter:
Charles R. Johnson, App’lt, v. The Union Switch & Signal Co., Resp’t.
(New York Superior Court,
General Term,
Filed April 7, 1890.)
Patents—License—Pleading.
A contract of employment provided that in the event of its termination the company defendant “ 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 $6,500 per year, to be paid quarterly." In an action for the amount alleged to be due for one quarter, Held, that the contract provided, not for an executed license, but for an option of which defendant could avail itself upon paying -a certain sum; that there was no express or implied promise to pay that sum, and that plaintiff, in order to recover, was bound to allege and show that defendant exercised the option and used the patents or some of them.
(Ingraham, J.„ dissents.)
Appeal from interlocutory judgment and order sustaining defendant’s demurrer to complaint.
6r. W. Miller, for app’lt; Paul D. Oravath and John W. Huston, for resp’t.

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 nonexclusive 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 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 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 § 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.
Sedgwick, Oh. J.
I agree with Judge Freedman, and wish to make a few further observations.
The rule of construction given in Decker v. Furniss, 14 N. Y., 611, should be followed. It is " there is no doubt that the phrase which stands at the commencement of the contract 1 William H. Brown sells, etc.,' imparts of itself an executed sale. But the books furnish abundant evidence that phrases of this kind are used in a very loose sense, and that their literal signification is often overruled by the tenor and purpose of the whole instrument. So a party to a contract may say he agrees 'to sell,' and yet the intention be entirely manifest that the title shall pass immediately. Such phrases are quite inconclusive, and are often made to yield to other terms of the contract evincing a different design."
The covenant, leaving out words not involved in the controversy, reads: " It is further mutually 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 $6,500 per year to be paid quarterly."
It appears that the sole consideration of the grant of the privilege to use is indicated in the words "by reason of the expenditures that shall have been made during the continuance of this agreement," and the words " on the payment of $6,500 per year," do not refer to the making of the grant. The latter words are a part of the description of the nature of the grant. That part is a license to use on the payment of $6,500. The general rule is that, nothing else forbidding, words that are relative must be held to refer to the last antecedent, that is, that the payment refers to " to use," and the further rule is that the antecedent being ascertained, it must he read in the relative clause, that is, that the payment is to be for the use.
It is not correct, in my judgment, to suppose that the relative clause refers to "shall have a license, etc.," inasmuch as there had been, as has already been said, a consideration appropriated by the covenant to the granting of the privilege or license.
This view does not combat the position that a promise to pay the $6,500 was implied, but it is used to show that the payment was to be made for the use. And the further question being, was there an implied promise to use, I must say that there is nothing in the covenant or the rest of the agreement that indicates that the defendants were bound to use the inventions.