Babcock & Wilcox Co. v. Toledo Boiler Works Co.

• Citation: 170 F. 81
• Decision Date: 18 May 1909
• Docket Number: 1,902,1,903.
• Parties: BABCOCK & WILCOX CO. v. TOLEDO BOILER WORKS CO. (two cases).
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

170 F. 81

BABCOCK & WILCOX CO. v. TOLEDO BOILER WORKS CO. (two cases).

Nos. 1,902, 1,903.

United States Court of Appeals, Sixth Circuit.

May 18, 1909

C. P Byrnes, for appellant.

Wilbur A. Owen and R. H. Parkinson, for appellee.

Before LURTON, SEVERENS, and WARRINGTON, Circuit Judges.

LURTON Circuit Judge.

These two cases, involving alleged infringements of two different patents, were heard together. This was feasible because the parties were the same in each case, and, though two distinct patents are involved, they pertain to appliances in connection with water-tube boilers, and each is alleged to have been used in the same structure. The defense was anticipation, nonpatentability, and the assertion that the equitable title to the patent, if valid, is in the defendants.

1. The patent involved in case No. 1,902 is a patent dated December 15, 1903, issued to the Aultman & Taylor Machinery Company assignee of the inventor, Kennedy Park. The patent is for an improved baffle wall brick, used in the construction of baffle walls of water-tube boilers. The inventor, in his patent, states:

'The object of the invention is to prevent the leakage of gases through the baffle wall, to reduce the number of joints, and to protect the brick by a metal casing during handling or transportation, while protecting the metal casing from the gases when in place.'

The patent involved in case No. 1,903 is another invention of the same Kennedy Park, the patent issuing to the same Aultman & Taylor Machinery Company, Park being assignor. It issued November 10, 1903, and is numbered 744,015, and is for 'a new and useful hand-hole cover. ' The inventor, in his specifications, says:

'My invention relates to the hand-hole covers employed in connection with the headers of water-tube boilers; and the object of the invention is to provide a hand-hole cover or cap which will conform to the sinuous curves of the headers ordinarily used, give access to a group of tubes without necessitating the use of a special form of header, and can be inserted or removed through the hand-hole it is to cover.'

Both patents were held invalid by Judge Tayler as not involving patentable inventions in view of the state of the art, and both bills were dismissed.

2. Before determining the validity of the patents, there is a question of estoppel, which, if found for the appellants, is determinative of the case, without regard to the defense of invalidity. These patents were for subordinate parts or attachments to water-tube boilers. Prior to both inventions, Park had secured a patent for a new type of water-tube boiler, and later secured a reissue, being reissue No. 11,870. When he made the water-tube boiler invention he was an employe of the Aultman & Taylor Machinery Company. Having completed his invention, he entered into a contract with that company, by which they were to have the exclusive right to make and sell such boilers in consideration of a salary and a royalty upon the sale of boilers so made and sold by that company. Under this arrangement the Aultman & Taylor Company undertook to at once construct and test a trial boiler under the patent, the construction to be at their expense, and under Park's supervision. After many delays, a boiler was constructed according to Park's reissue patent and subjected to satisfactory tests. During the construction of this trial boiler Park devised and applied to that boiler the baffle brick and hand-hole cover of the two patents now in suit. The Aultman & Taylor Company were of opinion that if these parts were patented it would tend to the better protection of the boiler itself when put upon the market. Park says that he did not regard the parts as properly patentable, but at the instance of the Aultman & Taylor Company agreed to apply for patents and to assign his inventions to that company, they paying all expenses of same. The patents in suit were accordingly applied for by Park, and, when granted, issued to the Aultman & Taylor Company, as his assignee. Two years elapsed after the completion and testing of the trial boiler, but no sale was made of the patented boiler. At that stage, the Aultman & Taylor Company sold out their entire general boiler business to the Stirling Boiler Company, the predecessor of the Babcock & Wilcox Company, appellants herein.

This sale included all of the patents owned by the Aultman & Taylor Company which related to boilers or attachments, or parts of boilers, though no mention was made of the two patents in suit. And it is doubtful whether at the time either party knew of or cared about these patents. The royalty contract with Park, under which the Aultman & Taylor Company were to make and sell his water-tube boilers, was expressly excepted out of this sale; neither did the test boiler which had been made by that company pass to the Stirling Company, the predecessor of the Babcock & Wilcox Company, circumstances indicating that both Park and the Aultman & Taylor Company at that time regarded the baffle trick and hand-hole covers as appliances or appurtenances pertaining to that contract and to boilers made thereunder. As this sale divorced the Aultman & Taylor Company from the boiler business, it operated by common consent as a termination of Park's royalty contract, as well as of all relations to that company as a salaried employe.

In view of the circumstances under which the patents in suit were taken out, and of the fact that the new devices therein covered were principally valuable as parts of the Park water-tube boiler, the contention has been advanced that Park is the equitable owner of the patents in suit, notwithstanding they issued by his directions to the Aultman & Taylor Company, as his assignees. This contention we shall pass by, and for the purposes of this case assume that these patents passed to the Stirling Company under the sale by the Aultman & Taylor Company of all their patents relating to boilers.

This sale left Park free to make other arrangements for the manufacture and sale of his water-tube boilers under his reissue patent, No. 11,870. He accordingly left the employment of that company, and after some negotiations assigned that patent to the appellee company, and entered their employment under a contract by which he was to receive a salary and a commission or percentage upon the sale of all his water-tube boilers made and sold by them. Thereupon defendants began to make and sell the Park water-tube boilers, and in connection therewith employed the baffle wall brick and hand-hole cover of the later inventions of the same inventor. The evidence convinces us that both Park and his new employer, the Toledo Boiler Works Company, were not intentionally guilty of infringing the patents in suit. We are persuaded that Park had forgotten that patents had ever issued, and that the appellee company had no actual knowledge of that fact until they were given notice by the attorneys for the appellant that they were infringing after they had commenced to make and sell water-tube boilers with their appurtenances. Constructive knowledge only may be charged to appellee from the records of the Patent Office. We allude to actual innocence, not because ignorance is an excuse for infringement, but for its bearing upon the question of estoppel by reason of their connection with the inventor, Park.

Assuming, as we shall, for the purpose of this case, that Park himself would be estopped, by his sale of the patents in suit to the predecessor of the appellants, from relying upon their invalidity when sued for infringement, we come back to the question of whether there is any such relation or privity between the defendant company and Park as to affect them with his estoppel.

But it is to be observed at the outset that Park is not sued. Neither is he a stockholder nor an officer of the Toledo Boiler Works Company. Neither did that company make any sale of either of the patents in question to the complainant or its predecessor in title. The only relation of Park is that he sold his water-tube boiler patent, to which the complainant has no shadow of claim, to the Toledo Company, and entered into their employment under a contract by which he is to receive a salary and a percentage upon all sales of his water-tube boiler made and sold by them. This gives him no financial interest in the profits or losses of that company. If they sell none of the boilers made under his patents, he gets nothing but his salary. Whether sales of the water-tube boilers are profitable or otherwise, his percentage is the same.

The Toledo Boiler Works is alone accountable to the Babcock & Wilcox Company for their infringement by using the parts covered by the patents in water-tube boilers made or sold by them under the Park water-tube boiler patent. Why shall they be estopped from defending their alleged infringement upon the ground of the invalidity of those patents? The ground upon which the assignor of a patent is estopped, when sued for infringement, to deny the validity of the patent he has sold, is that, having received a valuable consideration, he may not derogate from his grant by denying that it had any value. Thus in Babcock v. Clarkson, 63 F. 607, 11 C.C.A. 351, the Circuit Court of Appeals for the First Circuit, speaking by Judge Putnam, said:

'The precise nature of this estoppel does not seem to have been always clearly apprehended. It is, in effect, that when one has parted with a thing for a valuable consideration he shall not, so long as he retains the consideration, set up his own fraud, falsehood, error, or mistake to impair the value of what he has thus parted with. * * * This is as much in harmony with sound morals as with the fundamental rules of equity law; nor

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