Crown Die Tool Co v. Nye Tool Machine Works

• Decision Date: 19 February 1923
• Docket Number: No. 240,240
• Parties: CROWN DIE & TOOL CO. v. NYE TOOL & MACHINE WORKS
• Court: U.S. Supreme Court

261 U.S. 24

43 S.Ct. 254

67 L.Ed. 516

CROWN DIE & TOOL CO.

v NYE TOOL & MACHINE WORKS.

No. 240.

Argued Jan. 17, 18, 1923.

Decided Feb. 19, 1923.

This was a bill in equity filed in the United States District Court for the Northern District of Illinois by the Nye Tool & Machine Works, a corporation of Illinois, having its place of business in Chicago, against the Crown Die & Tool Company, a corporation of the same state and doing business in the same city. The plaintiff sought to enjoin the infringement of a patent for a machine for forming screw-thread cutting devices, and for an accounting of profits and for damages. The inventors were Wright & Hubbard, and the patent issued to their assignee, the Reed Manufacturing Company of Pennsylvania.

The plaintiff based its right to sue on the following instrument which it terms as assignment:

Exhibit A.

Whereas, Reed Manufacturing Company, a corporation of Pennsylvania, is the owner of letters patent of the United States, No. 1,033,142, for a machine for forming screw-thread cutting devices, granted July 23, 1912, on an application of Wright & Hubbard; and

Whereas, under said patent said Reed Manufacturing Company has the right to exclude others from manufacturing, using and selling the devices of said patent; and

Whereas, it is believed by the parties that Crown Die & Tool Company, a corporation of Illinois, has been manufacturing and using devices in infringement of said patent; and

Whereas, Nye Tool & Machine Works is engaged in the manufacture of dies with which the dies made by said Crown Die & Tool Company, by the use of said infringing machine, are in competition; and

Whereas, Nye Tool & Machine Works is desirous of acquiring from Reed Manufacturing Company all of its rights of exclusion under said patent, so far as the same may be exercised against the Crown Die & Tool Company, together with all rights of the Reed Manufacturing Company against the Crown Die & Tool Company arising out of the infringement aforesaid:

Now, therefore, in consideration of one thousand dollars ($1,000.00), and other good and valuable considerations, the receipt of which is hereby acknowledged, the Reed Manufacturing Company hereby assigns and sets over to the Nye Tool & Machine Works all claims recoverable in law or in equity, whether for damages, profits, savings, or any other kind or description which the Reed Manufacturing Company has against the Crown Die & Tool Company arising out of the infringement by the Crown Die & Tool Company of the Wright & Hubbard patent, No. 1,033,142, and for the same consideration assigns and sets over all the rights which it now has arising from said patent of excluding the Crown Die & Tool Company from the practice of the invention of said patent, the intention being that, in so far as concerns the exclusion of the Crown Die & Tool Company under said patent, the Nye Tool & Machine Works shall be vested with as full rights in the premises as the Reed Manufacturing Company would have had had this assignment not been made, and that the Nye Tool & Machine Works shall have the full right to bring suit on said patent, either at law or in equity against said Crown Die & Tool ompany, and for its own benefit, to exclude the Crown Die & Tool Company from practicing the invention of said patent, and for its own use and benefit to collect damages which may arise by reason of the future infringement of said patent by the Crown Die & Tool Company, but nothing herein contained shall in any way affect or alter the rights of the Reed Manufacturing Company against other than the Crown Die & Tool Company, and for the same consideration all rights as are herein given against the Crown Die & Tool Company are given as asainst any successor or assignee of the business thereof.

Reed Manufacturing Company,

By P. D. Wright, Its President.

The defendant moved to dismiss the bill as follows:

Now comes the defendant, Crown Die & Tool Company, by its solicitor, and moves the court to dismiss the bill of complaint instituted in the above-entitled cause upon grounds and reasons therefor as follows:

1. That the bill of complaint states an alleged cause of action arising out of the assumed infringement of a patent in which plaintiff has no title, and prays an injunction, and accounting and damages.

2. That the owner of the entire or any part of the legal title to the patent sued on is not made a party to the suit.

3. That the legal effect of the alleged assignment set up as the basis of this cause of action and forming part of the bill of complaint herein is contrary to the statutes covering suits for infringement of patents, and shows on its face that the plaintiff has no interest in the patent sued on.

4. That the bill of complaint herein, including the alleged assignment, evidences a conspiracy against this defendant by the parties to the document identified as 'Exhibit A,' in which the plaintiff and the Reed Manufacturing Company assumed the function of the court in having already decreed that this defendant infringes patent No. 1,033,142, and now seeks to utilize this court to annoy and harass the Crown Die & Tool Company by instituting legal proceedings when no right of action exists.

5. That 'Exhibit A' attached to the bill of complaint in this case purports only to convey to plaintiff all claims recoverable in law or in equity which the Reed Manufacturing Company may have against the Crown Die & Tool Company, over which subject-matter this court has no jurisdiction.

6. Prior suit pending, between the same parties in this court, decision of which will determine any questions involved in this case.

Therefore this defendant respectfully moves the court to dismiss said bill of complaint with its reasonable costs and charges in its behalf most wrongfully sustained.

Crown Die & Tool Co.,

By Florence King, Solicitor for Defendant.

The District Judge in the interest of expedition granted the motion to dismiss, in order that the main question, i. e., the plaintiff's right to sue might be determined by the Circuit Court of Appeals before the expense of an accounting should be incurred, although he thought the plaintiff had acquired the right under the instrument 270 Fed. 587. The Circuit Court of Appeals reversed the decree of dismissal, holding the instrument to be a valid assignment of an interest in the patent conferring the right to sue and remanded the cause to the District Court for an accounting and further proceedings. 276 Fed. 376.

Although the decree of the Circuit Court of Appeals is not final the importance of the question involved and the possible saving of useless litigation led this court to grant the writ of certiorari before further proceedings in the District Court.

Miss Florence King, of Chicago, Ill., for petitioner.

Mr. Russell Wiles, of Chicago, Ill., for respondent.

[Argument of Counsel from pages 28-33 intentionally omitted] Mr. Chief Justice TAFT, after stating the case as above, delivered the opinion of the Court.

The petitioner raises a question of jurisdiction. It says that the suit does not arise under the patent laws of the United States, but is merely a suit on a contract like one for royalties under a license of which the Di trict Court could not have jurisdiction because the parties are both citizens of the same state. To sustain this argument are cited Albright v. Teas, 106 U. S. 613, 1 Sup. Ct. 550, 27 L. Ed. 295; Pratt v. Paris Gaslight Co., 168 U. S. 255, 18 Sup. Ct. 62, 42 L. Ed. 458; and Excelsior Wooden Pipe Co. v. Pacific Bridge Co., 185 U. S. 282, 22 Sup. Ct. 681, 46 L. Ed. 910. The cases have no application and the point is without merit. The bill in this case is based on an assignment of a patent claimed to be valid under the statutes of the United States, and asking the protection of the patent right thus assigned by injunction and an accounting. It therefore involves the validity of the assignment of a patent, which is a question arising under the patent laws because it depends upon their construction, and if the assignment is valid, the suit is just an ordinary suit for injunction and profits dependent on the validity of the patent and its infringement under those same laws. There is no question of royalties by contract in the case.

The main question is an interesting one. The argument of counsel for the respondent and the one upon which the Circuit Court of Appeals proceeded to its conclusion is that the right which the patentee derives from the government by its grant is not the right to make, use and vend; that such a right is a so-called natural right, not dependent on statute, but arises under the common law, and has no peculiar federal source or protection other than any other right of liberty or property. All that the government grants and protects is the power to exclude others from making, using, or vending during the grant of 17 years. Under the patent law, section 4898, R. S. (Comp. St. § 9444), a patentee may assign by an instrument in writing his patent or any interest therein. It is argued that, as the patent is only the power to exclude all from making, using and vending, the power to exclude some particular person from doing so is a part of that power of exactly the same nature, and therefore is a definite interest in the patent that can be assigned.

The analysis of the rights which a patentee acquires under the grant is sustained by a line of authorities. Bloomer v. McQuewan, 14 How. 539, 548, 14 L. Ed. 532; Patterson v. Kentucky, 97 U. S. 501, 24 L. Ed. 1115; United States v. Bell Telephone Co., 167 U. S. 224, 249, 17 Sup. Ct. 809, 42 L. Ed. 144; Bement v. National Harrow Co., 186 U. S. 70, 90, 22 Sup. Ct. 747, 46 L. Ed. 1058; Continental Paper Bag Co. v. Eastern Paper Bag Co., 210 U. S. 405, 28 Sup. Ct. 748, 52 L. Ed. 1122; Heaton Peninsular Co. v. Eureka Specialty Co., 77 Fed. 288, 294, 25 C. C. A. 267, 35 L. R. A. 728; Fuller v. Berger, 120 Fed. 274, 56 C. C. A. 588, 65 L. R. A....