Hubenthal v. Kennedy

• Decision Date: 09 October 1888
• Citation: 76 Iowa 707,39 N.W. 694
• Parties: HUBENTHAL v. KENNEDY ET AL.
• Court: Iowa Supreme Court

76 Iowa 707

39 N.W. 694

HUBENTHAL

v.KENNEDY ET AL.

Supreme Court of Iowa.

October 9, 1888.

Appeal from superior court, Keokuk county; HENRY BANK, Judge.

This is an action in equity for an accounting. By agreement of the parties the cause was sent to a referee, who reported his finding of facts and conclusions of law, to which all of the parties filed exceptions. The conclusion of the referee was that plaintiff was entitled to recover the sum of $7,142.26, with interest from the date of the commencement of the suit. The superior court overruled the exceptions, and entered judgment for that amount. Both parties appealed, defendants' appeal being first perfected.James H. Anderson and George H Edmunds, for appellant Dickinson.

Hughes & Rankin, for Kennedy.

D. F. Miller, Jr., and Frank Hagerman, for plaintiff.

REED, J., ( after stating the facts as above.)

The defendant L. B. Kennedy was the inventor of a machine for the manufacture of brick, and had obtained a patent therefor. He and defendant Dickinson were the owners in common of the right covered by the patent for the state of Minnesota and the territory of Dakota. On the 24th of July, 1882, they sold an interest in the right to plaintiff, and executed to him an instrument of conveyance, the material part of which is as follows: “ * * * I do hereby grant and convey unto the said Charles Hubenthal license under said patent to use said Kennedy's brick-machine, within the state of Minnesota and territory of Dakota, for one undivided one-half interest in the state of Minnesota and territory of Dakota, excepting in this sale all territory previously sold, as per accompanying list, for the sale, use, and behoof of Charles Hubenthal, and his legal representatives, for the full term of said patent; this license to be transferable in whole or in part, and to include the use of said brick-machine in in said territory only, and not outside thereof. Under this license the exclusive right of making said machine is hereby reserved from the license, and retained by the said Kennedy and Dickinson.” Plaintiff alleges that there was an arrangement between the parties that they should proceed to make sales of the right in the territory owned in common by them, and that they should account to each other for the proceeds in proportion to the interest held by each, i. e., that for all sales made by him he was to account to each of the defendants for one-fourth of the proceeds, and for all sales made by them they were to account to him for one-half of the proceeds. His complaint is that they have made a number of sales of territory; also, that they have sold a large number of machines in the territory, upon which they have received a royalty, but that they have neglected and refused to account to him for any portion of the proceeds. The allegation as to the agreement is admitted in the pleadings, but the other allegations are denied. The evidence shows that the following sales of territory were made: (1) Hennepin and Anoka counties, Minn., and the townships of Plainview and Elgin, in Wabasha county, Minn.; (2) Pembina, Grand Forks, Taill, Cass, Barnes, Stutsman, Burleigh, and Morton counties, Dak.; (3) Clay county, Minn.; (4) Polk county, Minn.; (5) Walsh county, Dak.; (6) Yard-right, West St. Paul, Minn.; (7) Ramsey county, Minn. It also shows that defendant sold a number of machines in the territory, for which they received prices in excess of the cost of manufacture, such excess being denominated royalty. But the sales were all to persons who had previously made purchases of territory or yard-rights, and the conveyances or licenses executed to them were in the same form as that given to plaintiff. The referee found that the first six sales enumerated above were made by defendants, and that they were liable to account to plaintiff for one-half the proceeds. He also found that they were not liable on the sales of machines, and, as stated above, the judgment is based upon these findings.

1. The first question arising on plaintiff's appeal is as to the correctness of the finding that defendants are not liable to account to him for the proceeds of machines sold by them in the territory. We are of the opinion that the holding is right. It follows, necessarily, we think, from the character of the right involved and the contract of the parties. The right acquired by plaintiff under his contract is a license to use the patented article (and, perhaps, to sell it) in the territory named, and that right is transferable. The same right, except as to the extent of territory in which it might be exercised, was acquired by each of the subsequent purchasers. But the right to make the article was reserved to defendants. Now, when they sold a machine to one who had already acquired the right to use it, they conferred no additional right as to its use upon him. The excess of the price charged over and above the cost of manufacture, then, was in no sense a royalty, although the parties so denominated it. It was a mere profit...