Bell & Howell Co. v. Bliss

• Decision Date: 07 October 1919
• Docket Number: 2701.
• Citation: 262 F. 131
• Parties: BELL & HOWELL CO. v. BLISS et al.
• Court: U.S. Court of Appeals — Seventh Circuit

262 F. 131

BELL & HOWELL CO. v. BLISS et al.

No. 2701.

United States Court of Appeals, Seventh Circuit.

October 7, 1919

On Petition for Rehearing, December 11, 1919.

On Petition for Rehearing.

David K. Tone, of Chicago, Ill., for appellant.

John M Zane, of Chicago, Ill., for appellee Bliss.

David Jetzinger, of Chicago, Ill., for appellee Spoor.

Suit in equity by Donald M. Bliss against the Bell & Howell Company and George K. Spoor. From an order granting a temporary injunction, defendant Bell & Howell Company appeals. Reversed, and bill ordered dismissed.

Appellant entered into a contract with appellee Spoor, whereby the latter secured the exclusive right to use, for a period of five years, a certain machine that embodied a patent held by appellant. It was also agreed that appellant would sell as many machines for $400 each as the licensee might require. In consideration thereof Spoor obligated himself to pay $140,000, in quarterly installments of $7,000 each. Spoor who was the sole owner of the Essanay Film Manufacturing Company, a film-making company, paid the first four installments, but thereafter defaulted. An action was thereupon commenced, and a judgment rendered against Spoor in the Illinois state court for $28,000. An appeal was taken therefrom and is still pending. At least two other actions were instituted as various installments became due.

While these actions were thus pending, appellee Bliss, the sole complainant, brought this suit against appellant and Spoor alleging infringement of the so-called Schneider patent, also covering a film-making machine; the usual relief being sought. Briefly stated, the theory of the Bliss suit was that the Schneider patent was prior to and a full anticipation of the Bell & Howell patent; that the latter patent was therefore void, and machines made thereunder by appellant and used by Spoor infringed the Schneider patent. Spoor filed a cross-bill, designated a counterclaim, against appellant, setting forth his contract with appellant, asserting that, if the patent to appellant was invalid, then this contract was void, and in his prayer for relief sought an injunctional order restraining appellant from prosecuting its actions in the Illinois courts, also praying that the contract between him and appellant be declared null and void, and demanding judgment for the $28,000 and interest previously paid.

Appellant by its answer charged appellees with a conspiracy to hinder and delay the collection of the $28,000 judgment, as well as the prosecution of the other actions, and, further charged that the bill of complaint was prepared at the instigation of Spoor; that the so-called Schneider patent was purchased pursuant to an agreement between Spoor and Bliss to assist Spoor in defeating the collection of the amount due appellant under the aforementioned contract.

After issue was joined, appellant moved to dismiss the suit because Bliss 'improperly and collusively instituted the cause for the purpose of creating a case cognizable in said United States District Court,' and for the further reason 'that the plaintiff, Donald M. Bliss, did not come into court with clean hands, but had been guilty of iniquity touching the matters and things charged in his bill.'

Counsel for Bliss moved to strike from appellant's answer the paragraphs charging an unlawful conspiracy between Bliss and Spoor to procure the Schneider patent to hinder and delay the collection of the royalties due under the license contract. Before the hearing was closed, appellant filed additional reasons in support of its motion to dismiss; it being urged that Bliss was only a nominal party, had no interest in the subject-matter of the suit, and that he and one Thompson, agent of Spoor, were guilty of such 'iniquity, collusion, champerty, and maintenance' touching the matters charged in the bill as to require the court to deny all relief. Both motions were referred to a master, who heard all the testimony and made a full report.

Upon this report being filed, the court struck out the portions of appellant's answer complained of, denied appellant's motion to dismiss, and later entered an order staying further action in the state court pending the appeal from the first judgment. Appellant on this appeal attacks, not only the injunctional order, but also the refusal of the court to dismiss the bill.

Before BAKER, ALSCHULER, and EVANS, Circuit Judges.

EVANS Circuit Judge (after stating the facts as above).

We find no theory upon which we can sustain the order granting the injunction. The agreement which called for the payment of $140,000, to recover an installment of which appellant brought this action in the state court, was a patent license contract. The two determining paragraphs are:

'The party of the first part hereby gives and grants to the party of the second part the exclusive right to use and to have used the said step printing machine as embodied in the aforesaid letters patent and applications, viz.' etc.

'The party of the second part hereby agrees to pay to the party of the first part for the exclusive right to use the step printing machines as herein granted the aggregate sum of one hundred and forty thousand dollars ($140,000.00) consisting of a yearly royalty of twenty-eight thousand dollars ($28,000.00, payable in equal quarterly installments of seven thousand dollars ($7,000.00), ' etc.

Other provisions calling for the sale and upkeep of the machines at a stipulated price (in no way involved in any of the state court actions) do not affect the relation of the parties as licensor and licensee.

Such being the position of the parties, Spoor cannot dispute appellant's title. He is estopped by his contract. Chicago & Alton Ry. Co. v. Pressed Steel Car Co., 243 F. 883, 156 C.C.A. 395; Siemens Halske Elec. Co. v. Duncan Elec. Co., 142 F. 157, 73 C.C.A. 375. It therefore follows that, even though Bliss were successful in this suit in defeating appellant's patent, no benefit would inure thereby to Spoor in any of the pending state court actions. He still would be liable on his contract for these unpaid installments. A reversal of the injunctional order necessarily follows.

Appellant, however, also asks us to dismiss the suit for the various reasons assigned. But our right to so dismiss, even though the injunctional order be vacated, is challenged by appellee, who urges that on appeal from an interlocutory injunctional order this court is without authority to direct a dismissal.

While many cases may be found where the appellate courts refused to consider the question of dismissal (and for good reasons in those cases), the question of the right to dismiss upon a proper showing is not debatable. Smith v. Vulcan Iron Works, 165 U.S. 518, 17 Sup.Ct. 407, 41 L.Ed. 810; In re Tampa Suburb Railroad Co., 168 U.S. 583, 18 Sup.Ct. 177, 42 L.Ed. 589.

Especially are we justified in considering the motion to dismiss, on the present appeal, for the facts upon which dismissal is asked also necessarily bear upon the question of the alleged abuse of judicial discretion in granting the injunctional order.

Whether we should order a dismissal of the suit, therefore, depends upon the particular facts and circumstances of this case, for a study of which we must more closely examine the findings of the master and the testimony in support thereof. That these findings so made are amply supported by the testimony we are fully satisfied. From the master's report it appears:

That after appellant had obtained its first judgment and pending appeal by Spoor, and after other actions had been instituted against him, Spoor sent his associate, Thompson, to New York to purchase the so-called Schneider patent, for which purpose Spoor advanced $6,500; that such patent was acquired for the avowed object of instituting a suit against appellant, which suit was to be used to defeat or delay appellant's actions in the state court or to force a compromise of them that Thompson, to more effectively accomplish this object, caused the assignment of the Schneider patent to run to one Bliss, plaintiff in this suit, who was the innocent tool selected to carry out this purpose; that Bliss has no real interest in the patent, and never has had any; in fact, he never hired an attorney to commence suit, nor paid any of the fees, has no voice in the management of the litigation, and is...