Court Opinion

ID: 9650904
Source: CourtListenerOpinion
Date Created: 2023-08-23 15:55:20.849484+00
Date Added: 2024-06-11T13:25:15.567732
License: Public Domain

MORTON, Circuit Judge
(dissenting).
I agree that the defendant was not entitled to an assignment of the patent; but it seems to me that he was entitled to a shop right. The essential facts are not in dispute. After having- conceived his invention of a base for a rotating car seat, Small made a miniature wooden model of it. It was of crude construction but embodied the principle on which the base worked. He did this work at home out of business hours. He showed the model to his immediate superiors in the factory; and it was also shown to persons higher in authority. By their orders working drawings and patterns were made and a full-sized seat was constructed at an expense to the defendant, so it is said, of about $7,400. A number of different workmen were employed on this work, to some extent under Small’s direction. But it does not appear that he was relieved of his duties as checker in order to supervise it. During this period Small was requested by his superiors in the factory to offer his invention to the defendant as a “suggestion.” The defendant had a system under which workmen were encouraged to make suggestions for improving its practice or product and were given bonuses for suggestions which were considered valuable. Small declined to put in his invention on this footing.
After the commercial base was completed, the defendant had its patent solicitor prepare an application for a patent covering it. This application was made in *722Small’s name, and was accompanied by an assignment to the defendant. Small was asked to sign these papers and refused to do so. About three weeks later he was discharged from his employment.
The District Judge found, “The plaintiff did not request that the defendant make models for his use and benefit. He merely permitted it and lent his assistance in order that those in authority in the defendant company, who believed the invention would meet their requirements, might be certain of it. This work was done for the defendant’s benefit, by its volition and with a view to the acquisition, not of a shop right, but of the invention itself. Nor did the plaintiff permit the defendant to make, use, and sell. these devices without compensation. His whole course of dealing as disclosed to the defendant indicated that he regarded the invention as his own and would afford the defendant no rights under it unless and until they should make a satisfactory agreement in regard to compensation. If there are circumstances under which, notwithstanding the foregoing facts, a shop right is to be inferred, this does not seem to me to be such a case.” The reasons on which this last ruling rests are not stated. The District Judge further found that at the interview in the office of the defendant’s patent solicitor, “after Mr. May had explained to the plaintiff the legal basis of a shop right, the plaintiff expressed the view that the defendant had one.” 13 F.Supp. 825, 832.
A shop right is a license from the patentee to his employer resting, either on a contract implied in fact from the relations between them and assistance furnished by the employer in developing the invention, or on an estoppel based on conduct by the inventor-employee which makes it clearly inequitable that he should be permitted to insist, as against his employer, on the exclusive rights granted him by the patent. In this latter aspect, “The principle is really • an application or outgrowth of the law of estoppel in pais, by which a person looking on and assenting to that which he has power to prevent is held to be precluded ever afterwards from maintaining an action for damages.” Brown, J., Gill v. United States, 160 U.S. 426, 430, 16 S.Ct. 322, 324, 40 L.Ed. 480. Each case depends on its own facts, and the decisions shade into each other. In Burton v. Burton Stock-Car Co., 171 Mass. 437, 50 N.E. 1029, the circumstances were held to show an implied license upon payment of a reasonable royalty. In McClurg v. Kingsland, 1 How. 202, 11 L.Ed. 102, it was held that the facts justified the presumption of absolute license. In Keyes v. Eureka Mining Co., 158 U.S. 150, 15 S.Ct. 772, 39 L.Ed. 929, it was held that there was an implied license to usé the invention without payment of royalties during the continuance of the inventor in the defendant’s employment, and also a license to use it upon the same terms and royalties fixed for other parties from the date when the patentee left the defendant’s employment. These decisions illustrate how flexible the law is on this point, and how free the courts have felt to work out a just result.
In the present case the need for. an improvement in bases for car seats and the defects in existing seats were called to the plaintiff’s attention in connection with his employment and led him to apply his mind to the question. , He submitted his invention to the. defendant in a very crude form. The principle was there; but from the whittled-out wooden model which the plaintiff showed the defendant to a completed base suitable for use in a railroad car was a long way, beset with many practical problems of manufacturé which remained to be solved and which were certain to involve and did involve substantial expense. My brethren make no account of these difficulties; they assume that when invention is complete the thing is ready for the market. This is rarely if ever true and.was not true in this case. The difficulties and expense involved in putting an invention into commercial form, when met by the inventor’s employer, are one of the recognized reasons for shop right. Cases supra.
In this case Small permitted the defendant to go ahead and develop the crude model of his invention into a practical base. This work was done by the defendant’s workmen in'its factory at its expense, and with no cost to Small. He was kept on his old duties at his regular salary. A good deal of the work was of kinds in which he was not skilled. He supervised it and made suggestions. I can see no substantial difference between the present case and one in which the inventor was taken off his regular work by the employer and assigned the task of completing his invention, the employer paying him for his time in so doing — which is the typical case of shop right. The expenditure by the employer on the employee’s invention is not, as both parties understand in absence of evidence to the contrary, intended as a gift to the *723employee. The inventor understands that he is to compensate his employer in some way for the expenditure on the invention. The only question is what form-that compensation was expected to take. When there is an express agreement on the point it controls. When there is not the courts imply one for compensation in the form of a shop right, either unrestricted, or limited as justice may require. Cases supra.
Here the defendant, at the time when it developed the plaintiff’s invention, did so on the claim that the invention was its property, and that the patent, if one should be granted, would belong to it. The plaintiff disputed this from the start, and the defendant knew of the dispute. But both parties joined in the work of developing the invention. In Lane & Bodley Co. v. Locke, 150 U.S. 193, 14 S.Ct. 78, 81, 37 L.Ed. 1049, the employee-inventor notified the defendant of his rights but did not press them as long as he remained in the defendant’s employment. He gave as a reason for his failure to do so, “I had neither the time nor the means at my- command to enforce my rights in case of the refusal to comply with their agreement at that time.” It- was held that he stated no case for relief in equity. In Burton v. Burton Stock-Car Co., supra, on facts not so strong for the defendant as those here, it was held that there was a shop right. There is no evidence that the parties went ahead with the development work on the understanding that it would be a gift to the plaintiff if he should establish his right to the invention.
What seems to me to be the correct view of the matter is that both parties, by tacit agreement between them, joined in the development work on the invention, which in any event had to be done before it could be a commercial success, looking to a proper adjustment between them when their respective rights in the. patent (if one were granted) should be finally determined. This view is strongly supported by the plaintiff’s assent to Mr. May’s statement that the defendant did have a shop right under any patent which might be issued to him. I think Small must have understood that, if the ownership of the patent should eventually come to him he was botmd to compensate the defendant in a reasonable way for the expense which it had been to in developing his invention. An out-and-out shop right, i. e., an unconditional license for the life of the patent, greatly impairs the value of a patent. It' makes it impossible ’ for the patentee to control the market for the invention and protect his other licenses from open competition. In view of Small’s explicit reservation of rights such a shop right would go beyond what the defendant is entitled to. -On the other hand, Small’s assent to Mr. May’s statement shows that he recognized an obligation to the defendant in the matter. In these cases the courts have power to decree what appears to them to be an equitable arrangement between the parties. Cases supra. The just result, as it seems to me, is that the defendant should have a license under the patent on as favorable terms as granted to any licensee and that a certain proportion, perhaps one-half, of the amount expended by the defendant in the development work on the patent be allowed the defendant as a credit on such royalties as might become due under the license.