Court Opinion

ID: 8757192
Source: CourtListenerOpinion
Date Created: 2022-11-26 11:51:01.347124+00
Date Added: 2024-06-11T17:01:19.913564
License: Public Domain

On Rehearing.
This is an application by complainant for a rehearing of this cause and for leave to introduce additional proofs. A decision in complainant’s favor, rendered January 5, 1905, allowed an accounting, and held that no injunction should issue, as the licenses in question had expired and complainant had failed to exercise its option to extend the same. The petition for rehearing recites that, because of the opinion of the court, full and complete reargument, and the production of further available proofs upon the question whether the licenses were extended beyond March 26, 1903, becomes essential, lest injustice be done, if the cause be decided on the present record. Defendants contend that under well-established rules of procedure the hearing sought should not be allowed, on the ground that the evidence now offered is not newly discovered, and complainant has not been misled or surprised. This contention, persuasive of its correctness in a majority of cases, need not be discussed, as a careful review of the original decision and re-reading parts of the evidence satisfies me that the former ruling was er*612roneous, in that complainant was not afforded all the relief to which it is entitled.
The contention that the complainant’s rights under the licenses remained in force subsequent to March 26, 1903, was fully argued at the hearing, and sufficient evidence is found in the record in support thereof, although it was not given the importance which I now believe it merits. The opinion, after stating:
“As has been observed, the original New York Company license was until' February 6, 1891 (the Metropolitan Company license expiring earlier), and later, as has been stated, both licenses were extended until March 26, 1903. The original and extension licenses, after setting forth the conditions of the-second term, contained this provision: ‘Such further time, at the option of the party of the second part, as the party of the first part may be authorized to extend said license’ ”
—points out that there is no evidence that complainant ever exercised such option clause, and, accordingly, it was difficult to conceive upon what equitable grounds it was entitled to assert any rights beyond the second term. The excerpt from the licenses is-misleading, and does not correctly disclose the period of time for which they were equitably extended. The paragraph containing the term of extension in the agreement of June 23, 1890, between the American Company and the Metropolitan Company, reads as-follows:
“Third. It is further agreed that upon delivery, as aforesaid, to said Jesse H. Lippincott, trustee, or his successor, by said Central Trust Company of New York, of said shares of the capital stock of the party of the second part,, and upon the faithful performance. by the party of the second part of all the covenants and agreements made incumbent upon it by said agreement, of October 12th, 1888, then that this agreement shall become, and shall confer upon and shall fully and entirely vest in the party of the second part,, an extension of the rights granted to and conferred upon the party of the second part by said agreement of October 12th, 1888, for a further period and until the 26th day of March, 1903, and for such further time as the party of the first part may he authorized to extend such license; subject, however, to the covenants and agreements of said agreement of October 12th, 1888, as fully and entirely as if said agreement had been in the first instance made to cover the period of the extension granted hereby, as well as the period originally thereby fixed and limited.” (Italics mine.)
It will be noted that the words “at the option of the party of the second part,” upon which stress was placed in the original opinion, are omitted, although such words of apparent limitation are-contained in the original and extension licenses to the New York Company and in the original (not extension) license to the Metropolitan Company.
The question for further consideration is whether the franchise-rights granted to the Metropolitan Company were extended for the full period of time for which the licensor had authority to extend the same, or, as the court assumed, whether such rights were-wholly dependent upon the formal exercise of the option and the necessity of another agreement to extend the term. Complainant lays stress upon the perpetuity clause of the contract between Mr.. Edison, the Edison Companies, Lippincott, and the American Company, by which it was agreed that the phonographs and supplies-*613for use in the United States and Canada should be exclusively manufactured by the Edison Phonograph Works in perpetuity. Complainant insists that the licenses were in effect extended beyond the date mentioned in the contract, and for such period as the American Company by its agreement with the Edison Works was authorized to extend the same. The argument proceeds upon the theory that, as the American Company acquired legal title to the Edison phonograph patents, the license granted by that company to the Metropolitan Company continued during the life of the patents, and, the manufacturing contract between the American Company and the Edison Works being in perpetuity, the license privileges conveyed to complainant’s predecessors were likewise perpetual or of indefinite duration. This inference, however, is not warranted by the law or facts.
The parties to the various contracts undoubtedly intended to effect a mutually beneficial plan of co-operation in promoting and exploiting the phonograph, and to maintain, preserve, and perpetuate the relations established by the contracts. Hence such rights, franchises, and privileges as the American Company had authority to convey were conferred upon complainant’s predecessors. The agreements by which the patents were transferred to the American Company, and the established rights of the parties, considered in connection with the testimony of Mr. Edison, unquestionably warrant a determination that the parties actually intended their relation to be continuous and lasting. Such contracts not only in terms assigned to the American Company the then existing phonograph patents and those applied for prior to August 1, 1888, but also any invention or improvement upon the phonograph made within 15 years.
What precise meaning may be given to the words “in perpetuity” (contained in the contract between the American Company and Edison Phonograph Works) is not necessary to a decision here. The duration of the manufacturing contract, as to whether it was continuous, perpetual, or limited, does not affect the authority to extend the licenses in question, which the American Company had under the agreement by which the patents were sold to it and the exclusive rights granted as hereinabove mentioned. That the franchises, rights, and privileges secured were transmissible to complainant’s predecessors upon the terms and conditions specified in the contract must, therefore, be conceded. It is well settled that a patent does not carry with it any rights beyond the term of the patent, or, in the words of Robinson on Patents, § 815:
“A patentee is not permitted to issue a license beyond his own right.”
It may be noted for illustration that an extension of the term of the patent, which, in certain cases, was permitted under the prior act, does not inure to the transferee of a license, in the absence of language expressive of such intention. Hodge et al.v. Hudson River R. Co., 6 Blatchf. 85, Fed. Cas. No. 6,559; Wilson v. Rousseau et al., 45 U. S. 646, 11 L. Ed. 1141; Mitchell v. Hawley, 6 Fish. 331, Fed. Cas. No. 6,250; Id., 16 Wall. 544, 21 L. Ed. 322.
*614Furthermore, it is held that, during the period -wherein an exclusive right has been granted, the patentee or licensor cannot invade the territorial license without infringing the grant, and that, in the absence of express provision covering the duration for which a license is granted, the legal presumption is that the parties meant to continue their relations during the term remaining at the time the license or privilege is conveyed. This would seem to preclude the ’ possibility of the license to complainant’s predecessors containing a perpetual covenant or valid provision continuing the term beyond the life of the patents. However, a more serious problem is found in the suggestion that the extension clauses contained in the licenses to the Metropolitan and New York Companies were self-executing, and,continued beyond March 26, 1903, without the exercise of formal choice or the making of another agreement. As we have seen, the license to the Metropolitan Company does not expressly require giving notice of any desired extension, and contains no option clause. The phraseology of the para'graph containing the right of enlarging the terms of the licenses, though somewhat confusing and indefinite as to duration, must be read in connection with the prior contracts between Mr. Edison and the companies alleged to be under his control and the American Company. The rule is that the circumstances surrounding the transaction, the subject-matter of the arrangements, and the prior acts of the parties must govern the effect given to uncertain or equivocal phraseology in the contract. Del., L. & W. R. R. Co. v. Bowns et al., 58 N. Y. 573.
The words “for such further time as the party of the first part may be authorized to extend such license,” inserted in the license, when considered in relation to the covenants contained in the agreements whereby all inventions or improvements in the phonograph-made by Mr. Edison within 15 years were to be assigned to the American Company, would seem to clarify the evident uncertainty of the extension clause. Manifestly, at the time of executing the licenses, the parties were unable to specify and determine the period of their continuance, as that apparently was dependent upon future improvements in the phonograph and the status of the parties at the expiration of the original term. Such an interpretation of the intention of the parties induces the holding that, inasmuch as improvements were made subsequent to the contract of August 1, 1888, to wit, in the years 1888, 1889, 1890, 1891, 1892, and 1893, and patented by Mr. Edison, the license privileges or franchises granted by the American Company to the Metropolitan Company continued, without the necessity of further terms or conditions expressive of such intention. Such being the fact, the American Company had authority and power to convey the privileges mentioned in the agreement until the expiration of the life of the phonograph and improvement patents.
The New York Company license:
Except as hereinbefore pointed out, the provisions under which the duration of both licenses was extended are the same. The legal *615effect of the option in the New York Company license, in my opinion, was to enable that company, if it so desired, to abrogate the existing relations. This conclusion is not reached without hesita-tion, but further consideration of the evidence warrants holding that the option was in effect a reservation of a right to the licensee to discontinue the existing relations on March 26, 1903, if it no longer wished to co-operate in the enterprise. The extension of the license, obtained by the deposits of stock and of the extension license in the manner hereinbefore indicated, was for five years, and for such further time, at the option of the New York Company, as the licensor was authorized to extend the same. This evidently was a positive grant, and its terms; doubtless, were perfectly understood by the parties. As indicated, there is abundant evidence in the record from which the intention of the parties to extend the license to March 26, 1903, may be ascertained. Defendants’ contention that it was necessary, as a condition precedent, that complainant should formally notify the American Company, or its successors, on March 26, 1903, whether it elected to continue under the license granted to the New York Company, or preferred to exercise its option, is thought not to be maintainable. Not only was this action instituted prior to March 26, 1903, to compel a recognition of complainant’s rights under the licenses, but. complainant in many ways, as shown by the proofs, evidenced its intention to continue in the phonograph business and to exercise the right of carrying on the same under the license agreement. Its franchise rights, however, as has been stated, were persistently ignored and disputed by Mr. Edison and the defendants. That complainant endeavored to obtain phonograph records and supplies from other dealers when defendants refused to supply the same (as permitted by the terms of the license) is also shown. Attention is directed to the evidence showing that complainant’s efforts to obtain phonograph supplies were obstructed by a suit instituted by defendant National Company against Leeds, Catlin & Co., to enjoin them from supplying phonograph records or appliances to complainant. As already observed, the defendants, in my judgment, by their acts must be deemed to have regarded the extension clause as self-executing and operative beyond the period therein specified. Moreover, the invasion of complainant’s territory by the National Company, the refusal on the part of the defendants to recognize their exclusive rights granted, together with the institution of this action, would seem to have excused the New York Company from formally exercising any option. Such an act, in the circumstances presented, became nugatory and an idle ceremony. The principle is applicable that he who obstructs another in the performance of an act which otherwise would be obligatory may not avail himself of the nonperformance which he himself has occasioned. Dolan v. Rodgers, 149 N. Y. 489, 44 N. E. 167; Shaw v. Insurance Co., 69 N.Y. 286.
My conclusion is that a rehearing of this cause is not necessary. A re-examination of the record warrants the correction of the pre*616vious opinion; and hence complainant is entitled to an injunction and accounting as prayed for in the complaint. Such injunction, however, may be stayed until determination by the Circuit Court of Appeals of the questions presented, provided, of course, an appeal is taken and seasonably prosecuted. A decree in conformity with the foregoing opinion may be entered.