Court Opinion

ID: 6558781
Source: CourtListenerOpinion
Date Created: 2022-07-20 19:06:05.488362+00
Date Added: 2024-06-11T15:56:26.938910
License: Public Domain

The Chancellor.
It appears by sufficient allegations in the bill demurred "to that the complainant had discovered a process for making powder and communicated the process and formula to the powder company; that it and the defendant company; which latter company acquired all the assets and assumed all the liabilities of the former company, used the process to make great quantities of powder profitably; that the complainant made applications for patents of the process, and at the request of the defendant company assigned to it the applications for a nominal consideration, and has received no compensation therefor; that so far as appears no patents have been granted; that the complainant communicated the process and formula, made the applications for patents and assigned the applications without consideration, expecting to receive compensation for his invention if it proved to be valuable; that his right to payment for the use made by the defendant and its predecessor, the powder company, of his process was denied, though subsequently compensation, which he deemed inadequate, was tendered to him.
Boiled down, the case of the complainant is this: Having discovered a new formula for making powder, he disclosed it to his employer, relying on promises of reward or compensation by sale or otherwise if it proved valuable, and the employer, with the knowledge of the complainant, used it and not only made large profits by the use of it, but also obtained for a nominal consideration an assignment from the inventor of an application for letters patent on the formula.
*80Assuming that these facts, gave to the complainant a right to enforce compensation" from his employer, the vital question raised by the general demurrer is whether his remedy is in a court of law, or in equity. If he has a full, adequate and complete remedy in the former, he has no right to relief in this court. Clearly his right to compensation can be as readily enforced in a court of law as here. In either court he must prove the contract, or facts from which one will be implied, and his damages, or compensation, for the use of his invention. At law he has power to examine the books of the defendant company as fully as in equity. Indefiniteness in the terms of the agreement, or his inability tó prove the making of it, do not entitle him to equitable relief. The demand for payment would not create a right in equity, or at law. Neither would the tender - of certain benefits under some undefined system of the defendant of giving a bonus to its officers and, employes have any greater weight in equity than at law if used as evidence of a recognition of a duty to compensate the complainant. The prayer for an accounting of the profits derived by the use of the process does not of itself give jurisdiction to this court. Pomeroy’s Equity Jurisprudence, Vol. 1, §§ 176, 178, and Volume 4, §§ 1420, 1421; Dargin v. Hewlitt, 115 Ala. 510, 22 South. 128; Badger v. McNamara, 123 Mass. 117; Norwich, etc., R.R. v. Storey, et el., 17 Conn. 364, 390; Schwalber v. Ehman, et al., 62 N. J. Eq. 314, 49 Atl. 1085.
No reason has been shown why compensation to the complainant cannot be adequately obtained in an action at law, whether the agreement was to pay the complainant a fixed sum for the use of his process, or according to some other gouge for estimating j;he value of the process to the defendant was agreed upon. If the price was fixed, the amount of the damages were fixed thereby, and if no price was fixed, a quantum meruit would afford relief. There is, therefore, no right to relief in this court based on a right to compensation for the use of the process.
The injunctive relief sought and the prayer for a cancellation of the assignments of the applications for patents are, of course, distinctly grounds for relief in a Court of Chancery. But does the complainant show that he is entitled to this relief?
In his brief the solicitor for the complainant seems to regard *81the equity of the bill to be the right to have a reassignment of the applications for patents on the ground (1) that they were made without any consideration received by the complainant (2). that the inadequacy of the named consideration was such as to show itself an imposition on the complainant amounting to fraud; and (3) that fraud on the part of the defendant is proven by the profitable use made by the defendant of the process súb-i mitted for sale, such use being without the knowledge or consent of the complainant.. Was there no, consideration for the assignment? The alleged agreement for compensation for the use-, of the process was sufficient to support the assignment. There was; no allegation of misrepresentation by the assignee of any fact or. matter at or before the making of the assignment which would show fraud. The inadequacy of the consideration named in the assignment which was evidently a nominal consideration, was not evidence of a fraudulent purpose, nor did it invalidate the assignments, because according to the bill there was an agreement to compensate in addition to the nominal consideration. According-to the bill, the value of the process when disclosed by the complainant to his employer was uncertain and in this point of view the agreement, uncertain as it was as to terms so far as appears by the bill, was not necessarily one-sided or disadvantageous to the complainant.
It was not evidence of fraud or imposition by the defendant upon the complainant for the defendant to make a profitable use of the formula, for it was the understanding that it could and would, be so used. Besides, he knew of the use being made of it. He states that he was not “fully” aware of the use made by the defendant of the formula until after December, 1915. This is not, as full or frank a statement as he should have made. At any rate he had such knowledge as should have at least stimulated his curiosity. Whether he knew of this use of the formula on August 9, 1916, when he assigned the applications for patents does not appear. In no event, however, does any matter alleged as constituting fraud or imposition show there was such misconduct on the part of the defendant, but on the contrary they seem to be negatived.
It was urged that there was some confidential relation between *82the complainant and defendant arising from his being employed by the defendant, which relation gave him equitable rights which a stranger to such relation would not have. But n this matter the relation of employer and employe had no bearing, and the complainant had no greater'rights than a stranger would have had under the same circumstances.' Disappointment in his reliance on the promise of his employer to compensate him would not of itself give a right to equitable relief, for his right to compensation according to the bill was based on a contract. Neither would the failure of the defendant to pay the compensation, or give the reward as agreed upon, definitely or indefinitely, ■ give the complainant a right to rescind the agreement, or to cancel the assignments.
. In 2 Pomeroy’s Equitable Remedies, § 686, it is thus stated:
“It is, of course, the general rule that the mere failure by a grantee to perform a promise which formed the whole or part of the consideration inducing an executed conveyance, gives rise to no right of rescission in the grantor either at law or in equity, unless such promise amounts to a condition, and it is a rule of construction that in case the language or intention is doubful the- promise or obligation of the grantee will be construed to be a covenant limiting the grantor to an action thereon and not a condition subsequent with the right to defeat the conveyance.” Dawe v. Morris, 149 Mass. 188, 21 N. E. 313,4 L. R. A. 158, 14 Am. St. Rep. 404; Piedmont, etc., Co. v. Piedmont, etc., Co., 96 Ala. 389, 11 South. 332.
In Piedmont, etc., Co. v. Piedmont, etc., Co., 96 Ala. 389, 11 South. 332, land had been conveyed to a new industry under an agreement by the promoters that the new enterprise would be established and operated for two years. A bill to obtain cancellation of the deed based on the failure to keep the agreement was dismissed, the Court saying:
“The mere breach of such a promise, after deed made on the faith of it, would no more authorize the grantor to have the deed annulled, by a court of equity than would the failure of a grantee of lands to pay his note given for the purchase money authorize the grantor to rescind the trade and have the title revested in himself.”
It is, however, no answer to the complainant’s case to say that an inventor has no property right in his invention until he has obtained his patent (1 Robinson on Patents, § 24), and that before obtaining his patent he has no right respecting his invention *83which he can enforce in a court (Rein v. Clayton, [C. C.] 37 Fed. 354, 3 L. R. A. 78). Those principles have no application to a case where the inventor agrees that another may use the invention in consideration that compensation be made to the inventor in case the invention be found valuable. Such a contract would be enforceable as between these persons even if the patent never was issued. The law as to patents has no application to the rights and duties of the parties to the agreement under consideration.
The conclusion is that the remedy of the complainant based on a breach of contract is full, adequate and complete at law; that there were no sufficient allegations of matters showing fraud, or imposition; that there was a consideration for the assignments; and that failure to compensate the complainant did not give a right to any relief in a Court of Chancery.
The special demurrer to the inadequacy of the allegations in the bill as to fraud on the part of the defendant will be sustained. Fraud must be alleged as well as proved, and the bill must show the subject-matter constituting the fraudulent conduct, as distinct from the evidence to prove the subject-matter. 1 Beach on Equity Practice, § 107.
Where a bill sets forth such leading facts as do not when analyzed show a case of fraud, allegations or averments in the bill that there was fraud, and such expressions as “fraudulently,” “fraudulent conduct and practices,” and the like, interspersed throughout it, will not bring the case within equitable jurisdiction. Magniac v. Thomson, 2 Wall, Jr. 209, Fed. Cas. No. 8,957. In this cited case the Court at page 254 well stated the general principle thus:
, “A court of equity, when examining a bill of complaint to find a grievance which will justify its interposition, looks to the substantive facts averred in it, not to the adjectives or adverbs which may be added to qualify them.”
An examination of the bill will show that this rule has been ignored, for it is not clear as to what facts the complainant had in mind in charging “fraud,” “fraudulent promises and practices,” and the like.
The demurrer in its general and special aspects will be sustained. But inasmuch as it may be possible to amend the bill, and because it is not proper to order it dismissed, as was done in *84another kind of a case (Cochran v: Cochran, 2 Del. Ch. 17), the only order to be made will be one sustaining the demurrer, with leave to the complainant to apply to amend the bill within a fixed time, and in default of amendment that the bill be dismissed.
Let an order be entered accordingly.