Holmes, Booth & Haydens v. McGill

• Decision Date: 03 April 1901
• Docket Number: 57.
• Citation: 108 F. 238
• Parties: HOLMES, BOOTH & HAYDENS v. McGILL.
• Court: U.S. Court of Appeals — Second Circuit

108 F. 238

HOLMES, BOOTH & HAYDENS v. McGILL.

No. 57.

United States Court of Appeals, Second Circuit.

April 3, 1901

George W. McGill, a citizen of the state of New York and resident of the city of New York, brought four actions at law against Holmes, Booth & Haydens, a Connecticut corporation, before the United States circuit court for the Southern district of New York, to recover royalties under the contracts annexed to the complaints for the succeeding quarters of a year from April 1, 1895, to July 1, 1896. The four suits were, by order of court, consolidated, and were referred by written consent of the parties to Hon. William G. Choate 'to hear and determine all the issues herein, a jury having been waived and judgment may be entered upon his report or decision as such referee with the same force and effect if the issues had been heard and decided by the court under stipulation for a trial by the court without the intervention of a jury. ' Judgment was entered in the consolidated suit in favor of the plaintiff for $20,315.96 in accordance with the report of the referee. This writ of error was brought to review the judgment. The questions in the case are upon the construction of a contract dated March 23, 1876, and three amendments or additions hereto.

John E Parsons, for plaintiff in error.

Henry G. Atwater, for defendant in error.

Before WALLACE and SHIPMAN, Circuit Judges.

SHIPMAN Circuit Judge (after stating the facts as above).

In 1876, McGill was manufacturing metallic paper fasteners known as 'McGillS Fasteners' under patents issued to himself as inventor, the fundamental patent having been issued July 24, 1866; and on March 23, 1876, entered into a written contract with the defendant, a corporation largely engaged in the manufacture of brass and copper articles. The portions of the contract which relate to the present controversy are as follows:

'Whereas, George W. McGill is now the sole owner of letters patent of the United States No. 56,587, issued to him July 24, 1866, for a metallic fastener, and is also sole owner of several letters patent of subsequent date issued to him for elaborations and modifications of said fastener, all of which subsequently dated patents are subordinate to and controlled by said letters patent of July 24th, 1866; and whereas, the firm of Holmes, Booth & Haydens are desirous of making and selling both in the United States and foreign countries all of said fasteners, and other articles made under said patents, and all articles made in the similitude of said fastener which the said McGill has now or may hereafter devise or patent: Now, therefore, it is agreed between the said George W. McGill and said Holmes, Booth & Haydens as follows: First. Said Holmes, Booth & Haydens are to have the sole and exclusive license and right to manufacture all of McGill's fasteners and suspending devices secured and controlled by the before-mentioned patents, or which may be secured by subsequent patents issued to said McGill. Second. The prices which the said Holmes, Booth & haydens are to render as the cost of said goods shall not exceed twenty-five percent, over the actual cost of the material and labor used in the manufacture; the price of ordinary brass to be 10 cents per pound above the average price of lake ingot copper. Third. The prices which the said McGill now pays D. M. Somers for the manufacture of said goods, a list of which is hereto attached, marked 'Exhibit A,' shall be considered a proper basis to commence upon; and such prices shall not be altered to pay more than the profit on manufacture above stated based upon brass at the foregoing rate. * * * Seventh. Said Holmes, Booth & Haydens are to have the sole and exclusive sale of these goods both in the United States and in foreign countries. * * * Tenth. Holmes, Booth & Haydens are to make up and constantly keep on hand a stock of said goods in such variety and quantity as will enable them to promptly fill all orders on them for the same, and will use their very best endeavors to extend and push the sales of the same. Eleventh. Holmes, Booth & Haydens are to keep a separate set of books, in which shall be entered all transactions relating to the stock and sales of these goods, and shall render monthly statements to the said McGill of sales of the same, and shall during each month in preparing said statements, deduct the price paid for manufacturing the goods sold the preceding month from the net amounts for which they were sold, and shall each month place three-fourths of the balance to the credit of the said George W. McGill as his royalty, and subject to his order, except on such of said goods as they may have shipped out of the United States to foreign countries, and upon such shipments or sales his royalty is to be one-half the balance ascertained as aforesaid. The said books shall at all reasonable times be open and subject to the inspection of the said McGill or his agent. Twelfth. The said McGill is to sustain the validity of his patents at his own expense, and is also at his own expense to furnish sample cards and cuts of his goods, and to pay the expense of advertising. * * * Fourteenth. This agreement shall continue for twenty years from its date, unless sooner dissolved by mutual consent; but at the expiration of ten years said Holmes, Booth & Haydens may terminate the same by surrendering to said McGill, his heirs or assigns, all the interest of Holmes, Booth & Haydens in said business at a valuation made by disinterested parties, which shall only embrace all goods on hand at cost as fixed by the conditions of this agreement; and at the option of Holmes, Booth & Haydens such special tools and machinery, etc., as may be connected with the manufacture of the goods herein referred to, but nothing for the good will of the business. And said Holmes, Booth & Haydens will then desist from the further manufacture and sale of said goods. And after the expiration of the letters patent of July 24, 1866, or any reissue or extension thereof, the royalty to be paid to said McGill on the goods formerly made under that patent and which may be made under the remaining letters patent referred to in this agreement, and the license upon which it is based, of even date herewith, shall be a sum equal to one-half of the net profits arising from sales of all the goods specified herein, as ascertained under the articles of this agreement. * * * Fifteenth. It is agreed that the present selling prices and discounts on said goods stand, but may be altered at any time when found necessary, by mutual consent. And after the expiration of the letters patent of July 24, 1866, said Holmes, Booth & Haydens may regulate prices to meet the exigencies of the market according to their judgment.'

The list of goods in Exhibit A contains six different articles made in different sizes. The entire price list includes 32 numbers. All these articles, except 'Miscellaneous Fastener 16,' were made or were claimed by McGill before the date of the contract of 1876 to have been made under patents to him. It appears, but not with certainty, that this fastener was represented on McGill's boxes before March 1876, to have been patented. The point that substantially the entire Somers list consists of articles claimed to have been patented is of some importance because the referee was led to suppose that the fact was otherwise, and to advert to it in the construction of the contracts. At the date of the contract McGill owned the patent of March, 1866, and three other patents of April 20, 1875, for metallic fasteners, two patents for suspending devices, one for buttons, and three patents for clips, punches, and a press. The license mentioned in article 14, and executed by McGill contemporaneously with the contract, granted an exclusive license to the defendant to manufacture and sell goods under these ten patents and three design patents. On July 24, 1883, the date of the expiration of the patent of 1866, the parties amended the contract of 1876 by erasing the parts of the fourteenth and fifteenth clauses which are in italics, and by including in the agreement 12 patents issued to McGill after March 23, 1876. On February 19, 1894, the agreement was extended for the term of 30 years from March 23, 1896, the date of the expiration of the contract of 1876; but on March 23, 1901, either party could terminate the contract upon previous...