Heaton-Peninsular Button-Fastener Co. v. Eureka Specialty Co.

• Decision Date: 12 October 1896
• Docket Number: 312.
• Citation: 77 F. 288
• Parties: HEATON-PENINSULAR BUTTON-FASTENER CO. v. EUREKA SPECIALTY CO. et al.
• Court: U.S. Court of Appeals — Sixth Circuit

77 F. 288

HEATON-PENINSULAR BUTTON-FASTENER CO. v. EUREKA SPECIALTY CO. et al.

No. 312.

United States Court of Appeals, Sixth Circuit.

October 12, 1896

This is an appeal from the decree of the circuit court for the Western district of Michigan sustaining a demurrer filed by the defendants, and dismissing the bill of the complainant. The averments of the bill are substantially these: The complainant, a corporation of the state of Rhode Island, is by assignment, the sole owner of several patents for inventions relating to the art of fastening buttons to shoes with metallic fasteners. The validity of these patents is not now involved. The machine embodying these inventions is used exclusively for affixing buttons to shoes. The complainant and its predecessor in the title to the patents have been successful in getting them into general use in the shoe trade, and it is alleged that these machines have wholly superseded every other mode of fastening buttons to shoes. The object of these patents was to produce a machine wherein the buttons and staples should be automatically presented to a guide or carrier, having a combined driver and former co-operating therewith; the driver causing the insertion of the staple through the leather, or other material of the shoe, shaping and forming the head of the staple, the legs of the staple being clinched upon a suitable anvil. The principal and earlier of these patents--that of Charles H Eggleston (No. 293,234)-- describes the invention as intended to produce a setting device, 'which can be used conveniently for setting and clinching an ordinary metallic staple, and have the two prongs of the staple, if desired, in a line at right angles with the strain on the buttons. ' The mechanism by which such results are reached includes a staple chute or raceway, into which wire staples of suitable size are fed, and automatically conveyed, set, and clinched. The size of the staples to be used in the machine depends upon the size of the chute or raceway, and this depends upon the judgment of the manufacturer of the machines. No staple can be used in the machine which is not adapted in size to this raceway and a variation of a very slight character between the staple and the diameter of the raceway will prevent the operativeness of the machine. The bill alleges that neither the complainant nor its predecessors in title have ever sold any right to manufacture machines, but have reserved to themselves the monopoly of the manufacture and sale. It also alleges that no machines have ever been sold except upon condition, and that there is attached to each machine a conspicuous metal plate, on which is plainly expressed a restriction upon the use of the machine, to the effect that the machine was sold and purchased 'to use only with fasteners' made by the complainant, or the Peninsular Novelty Company, predecessors in title to the patents embodied in the machine, and that title should revert at once upon any violation of this restriction. Every user of the machine is alleged to have had full notice of this restriction upon the use of the machines, and to buy and use the machines subject to this restriction upon their use. These machines have been placed in the hands of shoe dealers, to the number of 49,000, at the actual cost of the machines to the makers, they expecting a profit on their monopoly alone from the sale of fasteners or staples to those having the machine. Complainant then alleges that the defendants, with full knowledge of this method of putting complainant's monopoly in general use, are making and selling staples adapted only to use with these machines, and that they are guilty of infringement, by reason of the fact that the staples so made and sold by them are adapted only to use in these machines, and are made and sold with intent that they shall be used in violation of the restriction placed by complainant upon the use of machines made and sold by it. It is further charged, in very broad and emphatic terms, that defendants maliciously persuade and induce the licenses of said machines to buy and use said staples on their machines, and to thus deliberately and continuously violate the restriction placed upon the use of the machine. It is not charged that the defendants either make, sell, or use said machines, but that they are guilty of contributory infringement, by inducing others to use the machine in excess of the license, and by furnishing them with the means for such infringement, with the express intent that the staples so sold and bought shall be so used.

Frederick P. Fish and James H. Lange, for appellant.

Arthur C. Denison, for appellees.

Before TAFT and LURTON, Circuit Judges, and HAMMOND, J.

After the foregoing statement, the opinion of the court was delivered by LURTON, Circuit Judge.

Staples in size and form adapted to use in such machines are unpatented articles, and not even an element in a combination claim. They are therefore no more within the direct monopoly of the patents than are the buttons to be affixed by means of the staples, or the shoe to which both are to be attached. This conceded fact furnishes the foundation for the principal objection to the bill presented by the demurrer. It has been very earnestly and ably argued by counsel for appellees that the restrictions on use imposed by the complainant operate to create a monopoly in an unpatented article, and are therefore void as contrary to public policy, or, if valid as purely legal contracts, are so unconscionable as not to entitle complainant to equitable remedies for their enforcement. This view seemed to meet with the approbation of the learned judge who heard the case below, who, in his opinion, said that he 'was persuaded that the patentee's privilege has its limits, in the rights and interests of the public, and that it is an abuse of his privilege to so shape his dealings with his patent as to secure a monopoly upon an unpatented article. ' This presents a question somewhat novel, and of wide general interest. The restriction imposed by the Peninsular Novelty Company, the assignors under whom complainant holds, was inscribed upon a metal label affixed to each machine, and was in these words:

'Condition of Sale.'

'This machine is sold and purchased to use only with fasteners made by the Peninsular Novelty Company, to whom the title to said machine immediately reverts upon violation of this contract of sale.'

The bill further charges that the complainant corporation has succeeded to all the patents, property rights, titles contracts, and contract rights of the Peninsular Novelty Company, and has continued the manufacture and sale of button-fastener machines under conditions and restrictions identical in terms and notoriety with the methods pursued by the predecessor company. If we, for the present, assume the legality of the conditions and restrictions imposed upon the purchasers of such machines, it is highly important to an orderly disposition of other questions that we shall, at the outset, determine whether the purchasers of the machines made and sold under complainant's patents are guilty of any infringement of the monopoly of the patents by using with such machines fasteners or staples not made by the patentee. Undoubtedly, the general rule is that if a patentee made a structure embodying his invention, and unconditionally make a sale of it, the buyer acquires the right to use the machine without restrictions, and, when such machine is lawfully made and unconditionally sold, no restriction upon its use will be implied in favor of the patentee. By such unconditional sale the machine passes without the limit of the monopoly. Adams v. Burke, 17 Wall. 453-457; Mitchell v. Hawley, 16 Wall. 544-547. That the complainant has attempted to state a case not within this rule is very obvious, for it charges that every sale has been under an express restriction as to the use of the invention embodied in the machine. In view of the conspicuous character of both the machine and the notice permanently affixed thereon, every one buying must be conclusively presumed to have notice that the owners of the patents intended by the inscription on the machine to grant only a restricted license for its use, and it is difficult to see why such purchaser is not to be regarded as acquiring and accepting the structure subject to this restriction. The buyer of the machine undoubtedly obtains the title to the materials embodying the invention, subject to a reverter in case of violation of the conditions of the sale. But, as to the right to use the invention, he is obviously a mere licensee, having no interest in the monopoly granted by the letters patent. A license operates only as a waiver of the monopoly as to the licensee, 'and estops the licensor from exercising its prohibitory powers in derogation of the privileges conferred by him upon the licensee. ' Rob. Pat. Secs. 806-808. It has been said that the sole matter conveyed in a license is the right not to be sued. Hawks v. Swett, 4 Hun, 146. A licensee is one who is not the owner of an interest in the patent, but who has, by contract, acquired a right to make or use or sell machines embodying the invention. Gaylor v. Wilder, 10 How. 477; Oliver v. Chemical Works, 109 U.S. 75, 3 Sup.Ct. 61; Rob. Pat. Secs. 606-608. All alienations of a mere right to use the invention operate only as licenses. It must follow, therefore, that the purchaser of one of complainant's machines subject to a restricted use takes the structure with a license to use the invention only with staples made by the patentee. That the complainant sells the machine through jobbers, and not directly to those who buy for use, is immaterial, under the facts stated on the face of the bill. The jobber buys and...