Heywood-Wakefield Co. v. Small, 3312.

• Decision Date: 14 April 1938
• Docket Number: No. 3312.,3312.
• Citation: 96 F.2d 496
• Parties: HEYWOOD-WAKEFIELD CO. v. SMALL et al.
• Court: U.S. Court of Appeals — First Circuit

96 F.2d 496 (1938)

HEYWOOD-WAKEFIELD CO. v. SMALL et al.

No. 3312.

Circuit Court of Appeals, First Circuit.

April 14, 1938.

COPYRIGHT MATERIAL OMITTED

Herbert A. Baker, of Boston, Mass. (Alan B. Bagley, of Boston, Mass., on the brief), for appellant.

Herbert W. Kenway, of Boston, Mass. (James H. Baldwin and Paul K. Connolly, both of Boston, Mass., on the brief), for appellee Small.

Edgar H. Kent, of Boston, Mass. (Harrison F. Lyman and Fish, Richardson & Neave, all of Boston, Mass., on the brief), for appellee Coach & Car Equipment Corporation.

Before BINGHAM, WILSON, and MORTON, Circuit Judges.

BINGHAM, Circuit Judge (after stating the facts as above).

The principal question raised by the defendant's motion to vacate the interlocutory injunction and to dismiss the case is whether the plaintiff, Small, and the Coach & Car Equipment Corporation, the intervening plaintiff, can maintain this suit for infringement. The determination of this question depends upon at least two of three subsidiary questions: (1) Whether the Coach & Car Equipment Corporation acquired a valid title to the patent under the so-called license contract of December 15, 1935, so that it would be entitled to damages for the defendant's infringement of the patent after that date; and, if it did, (2) whether Small acquired title to the patent when it issued to him on October 6, 1931, and can maintain this suit for damages for the defendant's infringement of the patent after that date and down to December 15, 1935, when the Coach & Car Equipment Corporation acquired title to the patent; and (3) if the Coach & Car Equipment Corporation did not acquire title to the patent, then whether he can maintain the suit for damages for the entire period of the defendant's infringement.

As to the question whether the Coach & Car Equipment Corporation acquired a valid title under the so-called license contract, it appears that on December 15, 1935, the date of that contract, Small had, at least, the apparent legal title to the patent; that it had issued to him from the Patent Office in his name; that the records in the Patent Office disclosed no record of an assignment of the patent from him; and that the Coach & Car Equipment Corporation paid him a substantial consideration, in good faith and without knowledge or notice, constructive or otherwise, of any defect in his title. Burck v. Taylor, 152 U.S. 634, 653, 14 S.Ct. 696, 38 L.Ed. 578; In re Atlantic Beach Corp., D.C., 244 Fed. 828; Dunn v. New York, 205 N.Y. 342, 98 N.E. 495; United States v. Detroit Timber & Lumber Co., 200 U.S. 321, 333, 26 S.Ct. 282, 50 L.Ed. 499; 46 C.J. p. 550, § 46; 20 Ruling Case Law, p. 342, § 3. These facts being established, and we think they are, the legal title to the patent became vested in the Coach & Car Equipment Corporation, if the so-called license contract was an assignment within the meaning of the patent law.

In that contract Small granted to the Coach & Car Equipment Corporation the exclusive right under the patent to make, use, and vend the invention during the entire term of the patent; and, as the grant to the patentee was the right to make, use, and vend the invention throughout the United States and the territories thereof, the exclusive right under the patent not being limited in the grant to any particular portion of the United States, and the grant being of the entire monopoly, the so-called license contract was an assignment and not a license, and vested the title to the entire patent in the Coach & Car Equipment Corporation. This being so, the corporation, having been allowed to intervene as a party plaintiff, may recover of the defendant such damages as it sustained from the date of its acquisition of the title to the patent (December 15, 1935) until the defendant ceased its infringement, subject to payments to Small as hereafter defined. Waterman v. Mackenzie, 138 U.S. 252, 255, 11 S.Ct. 334, 34 L.Ed. 923; Crown Die & Tool Co. v. Nye Tool & Machine Works, 261 U.S. 24, 37, 38, 43 S.Ct. 254, 257, 67 L.Ed. 516; Krentler-Arnold Hinge Last Co. v. Leman, 1 Cir., 13 F.2d 796, 799, 802; Littlefield v. Perry, 21 Wall. 205, 220, 22 L.Ed. 577. In the last two cases the consideration for the license or assignment was an agreement to pay royalties.

As to whether Small acquired such a title to the patent when it issued to him on October 6, 1931, that he can maintain this suit for damages for the defendant's infringement from that date to December 15, when the Coach & Car Equipment Corporation acquired title, it appears that Small was the inventor of the car-seat base; that he duly applied for a patent for his invention; and that the records in the Patent Office disclose no record of an assignment of his application before the patent issued to him or at any time. Under such circumstances, the statutes regulating the issuing of patents, Rev.St. §§ 4883, 4884, 4895, 4896, 4898 and 4897, as amended, 35 U.S.C.A. §§ 39, 40, 44, 46, 47, and § 38, are held to require that the patent issue to the inventor, the patentee, and that he takes the legal title to the patent when issued. But that, where the inventor assigns his application in writing and records the same, and the patent later issues to the patentee, the title to the patent vests in the assignee, without a further assignment. Gayler v. Wilder, 10 How. 477, 481, 491, 492, 493, 13 L.Ed. 504. And that, if no record of the assignment is made until after the patent issues, the title to the patent does not vest in the assignee until after the assignment is recorded. United States Stamping Co. v. Jewett, C.C., 7 F. 869, 877, 878.

In Crown Die & Tool Co. v. Nye Tool & Machine Works, 261 U.S. 24, at page 40, 43 S.Ct. 254, 258, 67 L.Ed. 516, Chief Justice Taft, in delivering the opinion of the court, said:

"Patent property is the creature of statute law and its incidents are equally so and depend upon the construction to be given to the statutes creating it and them, in view of the policy of Congress in their enactment. This is shown by the opinion of this Court in Waterman v. Mackenzie, 138 U.S. 252, 11 S. Ct. 334, 34 L.Ed. 923, already cited, and in the line of authorities followed therein. It is not safe, therefore, in dealing with a transfer of rights under the patent law to follow implicitly the rules governing a transfer of rights in a chose in action at common law. As Chief Justice Taney said in Gayler v. Wilder, 10 How. 477, 494 (13 L. Ed. 504): `The monopoly did not exist at common law, and the rights, therefore, which may be exercised under it cannot be regulated by the rules of the common law. It is created by the act of Congress; and no rights can be acquired in it unless authorized by statute, and in the manner the statute prescribes.'"

In Gayler v. Wilder, 10 How. 477, 481, 491, 492, 493, 13 L.Ed. 504, a written assignment was made and recorded in the Patent Office before the patent issued and contained a request that the patent issue to the assignee. It was issued to the patentee. The defendant contended that the assignment did not convey to the assignee the legal title to the monopoly subsequently conferred by the patent. The court, in that case, among other things, said:

"The act of 1836 declares that every patent shall be assignable in law, and that the assignment must be in writing, and recorded within the time specified. But the thing to be assigned * * * is the monopoly which the grant the patent confers: the right of property which it creates. And when the party has acquired an inchoate right to it, and the power to make that right perfect and absolute at his pleasure, the assignment of his whole interest, whether executed before or after the patent issued, is equally within the provisions of the act of Congress."

And held: "that, when the patent issued to him the patentee, the legal right to the monopoly and property it created was, by operation of the assignment then on record, vested in Enos Wilder the assignee."

In United States Stamping Co. v. Jewett, C.C., 7 F. 869, 877, 878, it appeared that the inventor filed his application for a patent June 3, 1871; that on July 20, 1871, he made an assignment of it to Heath & Smith Manufacturing Company; that the patent issued October 10, 1871, but the assignment was not recorded until November 18, 1871. And Judge Blatchford, then a circuit judge, but later a justice of the Supreme Court, held that the title to the patent did not vest in the assignee, the Heath & Smith Manufacturing Company, on the issuing of the patent, but only after the assignment had been recorded.

These cases demonstrate that, under the patent statutes regulating the assignment of an application for a patent, the recording of the assignment in the Patent Office is made one of the essential requirements of the assignment to vest the title to the patent in the assignee.

When the patent issued to Small, there being no record in the Patent Office of his voluntary assignment in bankruptcy, the estate being closed and no trustee in existence in whom the title to the patent could vest, Small took the legal title and ownership of the patent, charged with an equitable lien, or in trust, by virtue of section 70 of the Bankruptcy Act, as amended, by Act May 27, 1926, 11 U.S.C.A. § 110, and otherwise, to satisfy the claims of creditors who had proved them and to pay the expenses of administering the bankruptcy estate, with the right to hold any balance for himself. He did not take the title as a mere conduit to pass it on to the trustee in bankruptcy, for there was no trustee in existence. Furthermore, if the recording of the voluntary assignment be regarded as nonessential to the vesting of the title in an assignee, as there was here no assignee or trustee in existence when the patent issued in whom the legal title could vest, and the bankrupt estate was closed, equity, like nature, abhorring a vacuum, leaves the legal title in Small where it finds it, charged with an equitable...