General Electric Co. v. Westinghouse Electric Co.

• Decision Date: 02 March 1907
• Citation: 151 F. 664
• Parties: GENERAL ELECTRIC CO. v. WESTINGHOUSE ELECTRIC CO.
• Court: U.S. District Court — Northern District of New York

151 F. 664

GENERAL ELECTRIC CO. v. WESTINGHOUSE ELECTRIC CO.

United States Circuit Court, N.D. New York.

March 2, 1907

Hinsdill Parsons (Lewis E. Carr, John G. Milburn, and Charles Neave of counsel), for complainant.

Guthrie Cravath & Henderson (J. C. McReynolds, of counsel), for defendant.

RAY District Judge.

The decision of this court on the argument of the demurrer to the original bill of complaint herein is found in 144 F. 458. The question is whether or not complainant has now stated facts which, admitted to be true, entitle him to relief in equity. The facts alleged may be summarized as follows:

(1) Complainant, or General Company, is a New York corporation defendant, or Westinghouse, is a Pennsylvania corporation.

(2) About March 31, 1896, said corporations entered into a written contract, by its terms to continue and be in force for 15 years, and which has not been rescinded or abrogated wherein, in accordance with the facts, it was recited:

'Whereas, each of the parties hereto owns or controls a large number of patents and patent rights, and is willing to grant to the other party a license thereunder, upon such other party agreeing to observe the regulations and conditions as to the use of such license hereinafter provided; and

'Whereas, it is to the advantage of the parties hereto that they should cooperate in the manner hereinafter provided, in supporting the patents and patent rights which they severally control or may hereafter acquire.'

(3) Prior to and at the time of entering into said contract each of said companies was, and ever since has been, engaged in the business of manufacturing and selling electrical apparatus and devices.

(4) Prior to the making of such contract the General Company was making and selling, among other electrical apparatus, 'series-parallel controllers,' distinguished as 'K2 series-parallel controllers,' and other similar controllers containing a blow-out device, and ever since the making of such contract has been and now is manufacturing and selling such controllers, and also others operating on the same general principles.

(5) Such controllers have been and are so made and sold under patents owned or controlled by the General Company, and other patents for improvements on said patented inventions acquired since such contract was made.

(6) The recitals of the contract, quoted, referred (among others) to the patents above described.

(7) By such agreement each party granted to the other (subject to all outstanding licenses) a license to manufacture, use, and sell under all United States patents, except such as were expressly excepted by the terms of the agreement, which it owned or controlled, or with respect to which it had or might thereafter obtain a right to grant a license.

(8) By such agreement the Westinghouse Company is not to manufacture for use in the United States, except as hereafter stated, electric brakes or controllers of the kind or description above referred to, or any controller involving a blow-out device.

(9) By such agreement the General Company, complainant, is to sell and deliver to the Westinghouse Company, defendant, such electric brakes and controllers as it shall from time to time order at the same prices it sells same to others, less a limited and specified discount.

(10) By such agreement the General Company is not, except as specially provided, to manufacture overhead trolleys of any type (patents for overhead trolleys being owned or controlled by the Westinghouse Company).

(11) By such agreement the Westinghouse Company is to sell and deliver to the General Company such overhead trolleys as it may order at the lowest price it sells same to others, less a limited and specified discount.

(12) By such agreement the Westinghouse Company is to sell the said 'K2 series-parallel controller' and other series-parallel controllers of the same general type, or operating upon the same general principles, and controllers involving the use of a blow-out apparatus, and electric brakes manufactured by the General Company, to the exclusion of all other controllers of the same general type and operating upon the same principles, and of all other electric brakes.

(13) By such agreement the General Company is to sell the overhead trolleys manufactured by the Westinghouse Company, to the exclusion of all other overhead trolleys.

(14) The agreement then provides (a) that, in case the Westinghouse Company neglects or fails to comply with its said agreement as to furnishing the overhead trolleys, then the General Company may itself manufacture same during the continuance of such failure; and (b) that in case the General Company neglects or fails to comply with its said agreement as to furnishing controllers or electric brakes, then the Westinghouse Company may manufacture same during the continuance of such failure.

(15) The agreement provides for a 'Board of Patent Control,' and also provides that in case the question arises whether either party has violated its agreement by refusing, etc., to supply or furnish the other with the devices mentioned and which it has agreed to supply, the decision of such board on such question is to be final and binding on the parties.

(16) It was also agreed in such contract that each party would comply with the reasonable directions of the other as to marking the goods or devices ordered; that the Westinghouse Company would keep on hand a sufficient stock of such devices, including repair parts; that the General Company might sell all overhead trolleys it had in stock or in process of manufacture when the agreement was made, and that the Westinghouse Company might sell all controllers it had in stock or in process of manufacture at that time. The term 'overhead trolley' was also defined. The controllers on hand and in process of manufacture by the Westinghouse Company when the agreement was made were covered by the patents of the General Company.

(17) The bill of complaint alleges, and it is admitted by the demurrer, that the complainant, General Company, 'has expended large sums of money in a manufacturing plant and facilities with which to supply the reasonable requirements of the Westinghouse Company, defendant, with respect to said controllers,' and, in substance, that in all respects it has complied with and kept and performed its said agreement, and is able, ready, and willing so to do in the future; also, that it has expended large sums of money in developing and improving controllers which, within the intent and meaning of such contract, the defendant company was to purchase exclusively from it, the complainant company, all of which it has done, to meet the demand with respect to such controllers resulting from the development of the art of electric railroading.

(18) The bill of complaint also alleges:

'Eighth. That the controllers so manufactured by the General Company, which it was in and by said contract to have the sole and exclusive right to manufacture and sell in the United States, were and are those covered and protected by patents, issued by the Government of the United States, hereinbefore referred to as owned and controlled by the General Company; that the manufacture of such controllers or devices operating upon the same general principles by the Westinghouse Company is not only an invasion of the rights of the General Company under its patents, but is also a violation of the covenants and agreements on the part of the Westinghouse Company in said contract contained; that in and by said contract the respective parties thereto were granted and obtained licenses to use other patents than those relating to controllers; that the reservation to the General Company of the exclusive right to manufacture and sell controllers, as the same was reserved and provided for therein, was one of the inducements for the General Company to enter into said contract and grant to the Westinghouse Company the license it did to use and have the benefit of the other patents owned and controlled by it which were included in said agreement; and that, through the violation by the Westinghouse Company of that part of the said contract relating to the manufacture and sale of controllers, a part of the consideration for the agreements of the General Company therein contained will fail, unless the Westinghouse Company be enjoined and restrained from a continuation of such violation thereof.'

(19) The bill of complaint alleges a violation of the said agreement by the defendant company in the following language, viz.:

'Sixth. That the Westinghouse Company has since the execution of said contract, in violation of its covenants therein, manufactured and is now manufacturing, and threatens and asserts a right to continue to manufacture, for use in the United States, large numbers of controllers of the general type of 'K2 series-parallel controllers,' or operating upon the same general principles, irrespective of their form and the details of their structure or operation, and large numbers of controllers involving a blow-out device, notwithstanding it was covenanted and provided in and by said contract that the General Company should have the exclusive right to manufacture such controllers for use in the United States, and notwithstanding the fact that the General Company is now and has been at all times since said contract was entered into the owner or in control of the patents covering such devices with which ownership and control it has not parted since said contract was entered into; that the Westinghouse Company has sold, is now selling, and threatens and asserts a right to continue to sell for use in the United States large numbers of controllers not manufactured by the General Company under its

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