Goss v. Henry McCleary Timber Co.

• Decision Date: 02 March 1936
• Docket Number: No. 7712.,7712.
• Citation: 82 F.2d 476
• Parties: GOSS et al. v. HENRY McCLEARY TIMBER CO.
• Court: U.S. Court of Appeals — Ninth Circuit

82 F.2d 476 (1936)

GOSS et al. v. HENRY McCLEARY TIMBER CO.

No. 7712.

Circuit Court of Appeals, Ninth Circuit.

March 2, 1936.

Richard J. Cook, of Seattle, Wash., for appellants.

W. H. Abel, of Montesano, Wash., and T. H. McKay, of Aberdeen, Wash., for appellee.

Before WILBUR, GARRECHT, and MATHEWS, Circuit Judges.

WILBUR, Circuit Judge.

The appellants in the case at bar allege that the appellee has infringed their patent No. 1,541,350 issued June 9, 1925, and patent No. 1,663,982 issued March 27, 1928, and claims injunctive relief and an accounting therefor. Of such an action the federal court clearly has jurisdiction, as it arises under the patent laws of the United States. In addition, however, to such allegation, the plaintiffs allege a verbal contract between appellants and appellee for the supervision of the construction of certain dry kilns for the use of the patented method. The appellee, in its answer, admits the making of such an oral contract, admits that under said contract it has constructed kilns for the use of appellants' method, claims that it was authorized so to do by the verbal contract between the parties, admits the validity of the patents, and asserts a willingness to pay the contract price to the appellants when appellant Goss renders the services which he agreed to render in supervising the installation of the appliances in the kilns. The terms of the agreement as set out in the bill and answer thereto are not identical. The trial court in its findings of fact No. II stated the agreement to be as follows:

"In 1924 defendant corporation was operating sixteen dry kilns in connection with its door plant at McCleary, Washington. These dry kilns were old and of wooden construction, and defendant was contemplating their replacement with new kilns of concrete construction. Plaintiff Goss, who claimed to be a dry kiln engineer, approached defendant with a view to employment in such reconstruction and revision. Defendant wished to extend the life of the old kilns before going to the expense of replacing them with new kilns, and an agreement was entered into whereby Goss was to revise one old kiln at a price of $500 and if the revision of this one old kiln should prove satisfactory to defendant was to revise the remaining fifteen kilns for an additional sum of $2,000. Nothing was said about Goss having a patent or having applied for a patent on any system or method of dry kilning lumber or of dry kiln construction. The one old kiln was revised and tested by Goss to defendant's satisfaction and defendant paid him $500 therefor. No other kilns were at any time revised by Goss."

It made the following finding, No. III, as to the use of appellant's method: "June 9, 1925, a patent No. 1,541,350, was issued to plaintiffs covering their claimed improvement in the method and means of kiln drying lumber. The improvement in the method and means of drying lumber covered by their patent No. 1,541,350, and which was practiced by Goss in revising the old wooden kiln and used by defendant in its nineteen new kilns consists in piling lumber in a kiln in piles suitably supported, said piles consisting of layers with spaces between the layers, with a space between the piles so as to form a blind flue, the flue not extending all of the way to the top of the stack but being closed at the top by units of lumber lying across the flue, the air in the chamber or flue being heated by means located at the bottom thereof and with jets of steam injected upwardly into the bottom of the blind flue. By this method the hot air is forced through between the layers of lumber."

In the conclusions of law it was held that the appellants were not entitled to injunctive relief because of laches, nevertheless the decree grants an injunction prohibiting the use of appellants' invention in three kilns. The court also held that the appellee had made an implied election under the order of court requiring it so to do which fixed $2,000 as full compensation to the appellants for the past and future use of appellants' invention in its fifteen rebuilt kilns.

The court also concluded as a matter of law that the appellants were entitled to recover compensation for the value of the past and future use of the inventions in the three remaining kilns and for injunctive relief in case of failure on the part of the defendant to satisfy the judgment. The decrees gave judgment to the appellants for the sum of $2,000 "in full payment for the past, present and future right to operate and maintain sixteen dry kilns, using therein the patented methods." With respect to the three remaining kilns, the matter was referred to a master for finding and report as to the value of the use of invention in the three remaining kilns "and the profits, gains, savings and advantages which the defendant has derived, received or made, since January 24th, 1930, by reason of its infringement of said patents." The court "retained jurisdiction to determine the future and contingent right of plaintiffs to injunction in case of a failure on the part of defendant to fully satisfy this decree."

One difficulty arises in this case by reason of the jurisdictional question which requires a separation of the rights of the parties under the license agreement from the rights arising from the infringement of the patent.

The appellee, although it took no appeal, by a motion to dismiss the appeal raises the question of the jurisdiction of the federal court to consider questions growing out of the proper interpretation of the license agreement and the ascertainment of its terms upon the ground that such a question is not one arising under the patent laws of the United States as to which the federal courts have jurisdiction. The question of the jurisdiction of the federal courts to pass upon a patent infringement claim when the parties have entered into a contract involving the use of the invention has been before the Supreme Court on divers occasions. In Hartell v. Tilghman, 99 U.S. 547, 556, 25 L.Ed. 357, where an agreement between a patentee and a third person for the use of his invention was involved, the Supreme Court said:

"Where the contract being in parol the parties differ about one or two of its minor terms, — we do not agree that either party can of his own volition declare the contract rescinded, and proceed precisely as if nothing had been done under it. If it is to be rescinded, it can be done only by a mutual agreement, or by the decree of a court of justice. If either party disregards it, it can be specifically enforced against him, or damages can be recovered for its violation. But until so rescinded or set aside, it is a subsisting agreement, which, whatever it is, or may be shown to be, must govern the rights of these parties in the use of complainant's process, and must be the foundation of any relief given by a court of equity.

"Such a case is not cognizable in a court of the United States by reason of its subject-matter, and as the parties could not sustain such a suit in the Circuit Court by reason of citizenship this bill should have been dismissed."

That decision, however, has been modified by later decisions of the Supreme Court in so far as it held that once a contract is entered into between the parties they must thereafter rely entirely upon a suit under the contract for any relief in respect to the patent. These later cases hold that if the owner of the patent wishes to base his action on the theory of infringement he may do so and thus take the risk that defendant may prevent recovery by showing a license to do the act he has done. Such a defense would defeat the action, but would not oust the court of jurisdiction. Nor would the fact that the plaintiff as in the case at bar, sets...