American Telephone & Telegraph Co. v. Radio Audion Co.

• Decision Date: 22 April 1922
• Docket Number: 461.
• Citation: 281 F. 200
• Parties: AMERICAN TELEPHONE & TELEGRAPH CO. v. RADIO AUDION CO. et al.
• Court: U.S. District Court — District of Delaware

281 F. 200

AMERICAN TELEPHONE & TELEGRAPH CO. v. RADIO AUDION CO. et al.

No. 461.

United States District Court, D. Delaware.

April 22, 1922

Charles Neave and William R. Ballard, both of New York City, and William G. Mahaffy, of Wilmington, Del., for plaintiff.

Darby &amp Darby, of New York City, and Ward, Gray & Neary, of Wilmington, Del., for defendants.

MORRIS District Judge.

The plaintiff, American Telephone & Telegraph Company, having filed its bill of complaint charging the defendant Radio Audion Company with infringement, and the defendant De Forest Radio Telephone & Telegraph Company with contributory infringement, of claims 4 and 6 of letters patent No. 841,387, for improvement in devices for amplifying feeble electric currents, and claims 2, 3, 6, 14, 18, and 21 of letters patent No. 879,532, for improvement in space telegraphy, moved for a preliminary injunction. The motion has been heard upon bill, answer, affidavits, and exhibits.

The defendants admit that the patents in suit are valid, and that the Audion Company has been making and selling articles-- 'audions'-- embodying the inventions of those patents. They seek to justify such manufacture and sale however, by an immunity agreement entered into in November 1919, between the De Forest Company and the Radio Lamp Corporation; the rights of the latter under that agreement having been subsequently acquired by the defendant Audion Company. The plaintiff asserts, on the contrary, that by reason of an agreement of 1917 made between the De Forest Company (admitted by all parties to the suit to have been then vested with title to the patents) and Western Electric Company, Inc., the De Forest Company was at the time of making the contract of 1919 without such interest in the patents as would enable it to confer upon the Audion Company immunity from liability for future acts of the latter company that, but for the instrument of 1919, would be infringements of the patents in suit. Portions of the contract of 1917 here pertinent are:

'Now, in consideration of one dollar ($1.00) and other good and valuable consideration paid to the said De Forest Company by the said Western Company, * * * the said De Forest Company hereby * * * grants and agrees to grant to the Western Company a license (free of royalties or other payments other than those herein specified) to make, use, install, operate, and lease, and to sell or otherwise dispose of to others for sale, installation and operation, apparatus and systems embodying or made or operating in accordance with the following inventions: (Among which are included the inventions covered by the patents in suit.) * * *

'The said license is granted * * * for the full terms of the said patents granted or to be granted, and the license is granted for all transferable rights of said De Forest Company of any kind or nature whatsoever in said inventions, patents, and applications, except the rights hereinafter expressly reserved to itself by the De Forest Company. The said license granted and to be granted to the Western Company is exclusive, except for the aforesaid rights now held by the American Telephone & Telegraph Company, and except for the rights expressly reserved herein by the De Forest Company.

'The De Forest Company reserves to itself the following rights: * * * (4) Nonexclusive, nontransferable, personal rights with respect to radio communication, under all the patents, applications, and inventions included in this agreement for the following purposes only: * * *

'It is understood and agreed that the Western Company its successors, legal representatives and assigns, and the De Forest Company may, respectively, institute and conduct suits against others for infringement of any of said patents within the fields in which it possesses rights, but all such suits shall be conducted at the expense of the party bringing them, which party shall be entitled to retain any judgment recovered in any such suits.'

Pertinent portions of the contract of 1919 are:

'Whereas, De Forest Radio Telephone & Telegraph Company, a corporation duly organized and existing under and by virtue of the laws of the state of Delaware, is the owner of United States letters patent No. 841,387, issued January 15, 1907, to Lee De Forest and No. 879,532 issued February 18, 1908, to Lee De Forest, and owns the right to make, use, and sell apparatus embodying the inventions of said letters patents for amateur and experimental purposes, and owns the right to sue for and collect damages for infringement of said letters patents, or either of them, and to retain any sum recovered in such suit; and

'Whereas, Radio Lamp Corporation, a corporation duly organized and existing under and by virtue of the laws of the state of New York, desires to make apparatus embodying the said inventions of said letters patents without litigation with the said De Forest Company; and

'Whereas, De Forest Radio Telephone & Telegraph Company is desirous to avoid litigation and to grant immunity from suit for infringement of said letters patents, or either of them, by the manufacture and sale of apparatus embodying the invention of said letters patent, or either of them, to the said Radio Lamp Corporation: The following agreement by and between Radio Lamp Corporation, hereinafter called 'Radio,' and De Forest Radio Telephone & Telegraph Company, hereinafter called 'De Forest,' is made:

'(1) De Forest agrees to refrain from instituting or prosecuting any suit or suits against Radio by reason of its manufacture and sale of apparatus embodying the inventions of said letters patent, or either of them, during the life of this agreement. * * *

'(5) Radio agrees to pay De Forest twenty per cent. (20%) of the net sales price to the trade on each and every such device or apparatus embodying the inventions of said letters patent, or either of them, which Radio sells. * * *

'(16) This agreement shall be and continue in full force and effect until the expiration of both the letters patent hereinbefore referred to, when it shall terminate, unless sooner terminated under the provisions of paragraph (11) hereof.'

The obvious fact that after the agreement of 1917 the De Forest Company could not grant licenses under the patents in suit is expressly admitted by the defendants. They assert, however, that the De Forest Company, having under the express terms of that agreement the right to sue infringers of the patents and retain the benefits of suit, had the appurtenant right to settle such suit; that, having the right to sue and settle, it could continue to sue and settle, and that, having such rights, it could likewise grant immunity to an infringer from such suits; that the contract of 1919 is such an immunity contract, and not a license. In support of their contention that an immunity contract with respect to future infringements is not a license, the defendants cite and rely upon Nye Tool & Machine Works v. Crown Die & Tool Co. (D.C.) 270 F. 587, and Seibert Cylinder Oil Cup Co. v. Detroit Lubricator Co. (C.C.) 34 F. 216. As I understand the former case, it does not attempt to distinguish a contract or covenant granting immunity from suit and a license, but only between such immunity contract and an assignment. The latter case holds that a contract whereby one, in consideration of the payment of royalties, agrees not to sue another for future infringements, is in substance and effect a license. The court at page 221 added:

'No particular form of words is necessary to constitute a license. Any thing which confers upon another the right to do an act, which without such act would be illegal, is sufficient for that purpose.'

Furthermore, the Court of Appeals for the Sixth Circuit, in Heaton-Peninsular Button-Fastener Co. v. Eureka Specialty Co., 77 F. 288, 290, 25 C.C.A. 267, 270 (35 L.R.A. 728), said:

'A license operates only as a waiver of the monopoly as to the licensee, 'and estops the licensor from exercising its

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