224 U.S. 1 (1912), 20, Henry v. A. B. Dick Company

• Citation: 224 U.S. 1, 32 S.Ct. 364, 56 L.Ed. 645
• Party Name: Henry v. A. B. Dick Company *
• Case Date: Monday March 11, 1912
• Court: U.S. Supreme Court

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224 U.S. 1 (1912)

32 S.Ct. 364, 56 L.Ed. 645

Henry

v.

A. B. Dick Company *

No. 20

United States Supreme Court

March 11, 1912

Argued October 27, 1911

ON A CERTIFICATE FROM THE CIRCUIT COURT OF APPEALS

FOR THE SECOND CIRCUIT

Syllabus

Complainant sold his patented machine embodying the invention claimed and described in the patent, and attached to the machine a license restriction that it only be used in connection with certain unpatented articles made by the vendor of the machine; with the knowledge of such license agreement and with the expectation that it would be used in connection with the said machine, defendant sold to the vendee of the machine an unpatented article of the class

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described in the license restriction. Held that the act of defendant constituted contributory infringement of complainant's patent.

This Court does not prescribe the jurisdiction of courts, federal or state, but only gives effect to it as fixed by law.

A suit for infringement which turns upon the scope of the patent and privileges of the patentee thereunder presents a case arising under the patent law.

In determining questions of jurisdiction, this Court never shirks the responsibility of maintaining the lines of separation defined in the Constitution and the laws made in pursuance thereof.

A patentee who has leased his patent to a licensee under restrictions may waive the tort involved in infringement and sue upon the broken contract; but in that event, the case is not one arising under the patent laws and, in absence of diversity of citizenship, a federal court has no jurisdiction thereof.

Whether the case is one of infringement, of which the federal court has jurisdiction,, or of contract, of which it has not jurisdiction, is often determined by the remedy which complainant seeks.

The test of jurisdiction is whether complainant does or does not set up a right, title or interest under the patent laws or make it appear that a right or privilege will be defeated by one, or sustained by another, construction of those laws.

Whether a patentee may lawfully impose restrictions on the use of a patent and whether the violation thereof constitutes infringement are questions under the patent law.

A patentee may elect to sue his licensee upon the broken contract, or for forfeiture for breach, or for infringement.

While an absolute and unconditional sale operates to pass the patented article outside of the boundaries of the patent, a patentee may, by a conditional sale, so restrict the use of his vendee within specific boundaries of time, place, or method as to make prohibited uses outside of those boundaries constitute infringement, and not mere breach of collateral contract.

The extent of a license to use which is carried by a sale of a patented article depends upon whether any restrictions were placed upon the sale, and if so what they were, and how they were brought home to the vendee, and where, as in this case, a restriction is plainly placed upon the article itself, a sale carries with it only the right to use within the limits specified, and any other use is an infringing one.

The patent statute is one creating and protecting a true monopoly granted to subserve a broad public policy, and it should be construed so as to give effect to a wise and beneficial purpose.

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The monopoly of a patent extends to the right of making, selling and using, and each is a separable and substantial right.

A patentee may exclude others from the use of his invention although he does not use it himself. The Paper Bag Patent Case, 210 U.S. 405.

Although a contract in regard to use of a patent may include interstate commerce and restrain interstate trade, if it involves only the reasonable and legal conditions imposed under the patent law, it is not within the prohibitions of the Sherman Act. Bement v. National Harrow Co., 186 U.S. 70.

Contributory infringement is the intentional aiding of one person by another in the unlawful making, selling or using of a patented invention.

The larger right of exclusive use of the patentee embraces the lesser one of only permitting the licensee to use upon prescribed conditions.

Courts cannot declare the monopoly created by Congress under authority of the Constitution to be unwise; Congress alone has power to prescribe what restraints shall be imposed.

Where a great majority of the courts to which Congress has committed the interpretation of a law have construed it, so that the line of decisions has become a rule of property, this Court should not, in the absence of clear reason to the contrary, overrule those decisions on certiorari, and so held in this case after reviewing the decisions sustaining the rule of contributory infringement.

A bare supposition that an article adapted for use in connection with a patented machine sold under restricted license is to be used in connection therewith will not make the vendor a contributory infringer, but where the article so sold is only adapted to an infringing use, there is a presumption that it is intended therefor.

Questions certified by circuit court of appeals on appeal from 149 F. 424 answered in affirmative.

The facts, which involve the power of a patentee to enforce a license restriction as to the use of the patented article, and the determination of what constitutes contributory infringement, are stated in the opinion.

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LURTON, J., lead opinion

MR. JUSTICE LURTON delivered the opinion of the Court.

This cause comes to this Court upon a certificate under the sixth section of the Court of Appeals Act of March 3, 1891.

The facts and the questions certified, omitting the terms of the injunction awarded by the circuit court, are these:

This action was brought by the complainant, an Illinois corporation, for the infringement of two letters patent, owned by the complainant, covering a stencil-duplicating machine known as the "Rotary Mimeograph." The defendants are doing business as copartners in the City of New York. The complainants sold to one Christina B. Skou, of New York, a Rotary Mimeograph embodying the invention described and claimed in said patents under license which was attached to said machine, as follows:

LICENSE RESTRICTION

This machine is sold by the A. B. Dick Company with the license restriction that it may be used only with the stencil paper, ink, and other supplies made by A. B. Dick Company, Chicago, U.S.A.

The defendant Sidney Henry sold to Miss Skou a can of ink suitable for use upon said mimeograph, with knowledge of the said license agreement, and with the expectation that it would be used in connection with

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said mimeograph. The ink sold to Miss Skou was not covered by the claims of said patent.

QUESTION CERTIFIED

Upon the facts above set forth, the question concerning which this Court desires the instruction of the Supreme Court is:

Did the Acts of the defendants constitute contributory infringement of the complainant's patents?

There could have been no contributory infringement by the defendants unless the use of Miss Skou's machine with ink not made by the complainants would have been a direct infringement. It is not denied that she accepted the machine with notice of the conditions under which the patentee consented to its use. Nor is it denied that thereby she agreed not to use the machine otherwise. What defendants say is that this agreement was collateral, and that its validity depended upon principles of general law, and that, if valid the only remedy is such as is afforded by general principles of law. Therefore, they say that the suit is not one arising under the patent law, and one not cognizable in a federal court unless diversity of citizenship exists.

But before coming to the question whether this is a suit of which the circuit court had jurisdiction as a suit arising under the patent law, it may be well to notice an argument against jurisdiction based upon the suggestion that, if a breach of such a license restriction will support a suit for infringement, direful results will follow. Chief among the results suggested are an encroachment upon the authority of the state courts and an extension of the jurisdiction of the federal courts. And, to swell the grievance, it is said that if it be held that a breach of such a restriction will support a suit for infringement, parties will be deprived of the right to have the validity and import of the license restriction determined by the general law,

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and be compelled to have their rights determined by the patent law.

We are unable to assent to these suggestions. We do not prescribe the jurisdiction of courts, federal or state, but only give effect to it as fixed by law. If a bill asserts a right under the patent law to sell a patented machine subject to restrictions as to its use, and alleges a use in violation of the restrictions as an infringement of the patent, it presents a question of the extent of the patentee's privilege which, if determined one way, brings the prohibited use within the provisions of the patent law, or, if determined the other way, brings into operation only principles of general law. Obviously a suit for infringement, which [32 S.Ct. 366] must turn upon the scope of the monopoly or privilege secured to a patentee, presents a case arising under the patent law. The jurisdiction of the circuit court over such cases has, for more than a century, been exclusive by the express terms of the statute, although, for the most part, its jurisdiction over other kinds of suits arising under the Constitution and laws of the United States is only concurrent with that of the state courts.

The suggestion, therefore, that we should refrain from ruling that a patentee may sell a patented machine subject to restrictions as to its use, and may predicate infringement upon a use in violation of the federal lest such a ruling may draw to the...