Johnson Furnace & Engineering Co. v. Western Furnace Co.

• Decision Date: 28 March 1910
• Docket Number: 2,824.
• Citation: 178 F. 819
• Parties: JOHNSON FURNACE & ENGINEERING CO. v. WESTERN FURNACE CO. et al.
• Court: U.S. Court of Appeals — Eighth Circuit

178 F. 819

JOHNSON FURNACE & ENGINEERING CO. v. WESTERN FURNACE CO. et al.

No. 2,824.

United States Court of Appeals, Eighth Circuit.

March 28, 1910

Charles S. Thomas and A. J. O'Brien, for appellant.

George L. Wilkinson (Thomas F. Sheridan and Charles P. Abbey, on the brief), for appellees.

Before SANBORN and VAN DEVANTER, Circuit Judges, and WM. H. MUNGER District Judge.

WM. H MUNGER, District Judge.

On the 21st day of August, 1903, Alfred E. Johnson made application to the United States Patent Office for an improvement in grates. His application was allowed September 19, 1904, and patent No. 778,749 issued therefor December 27, 1904. On August 24, 1904, Johnson entered into a contract with one J Elmer Parkison, by the terms of which Johnson, in consideration of the services theretofore rendered by said Parkison, and the covenants and agreements on the part of Parkison therein contained, covenanted and agreed to pay to Parkison one-eighth of all net profits derived from the sale from rights to use or as royalties for the said invention and all improvements thereon, and when said invention and improvements, or any interest therein, should be finally sold or disposed of, Johnson agreed to pay Parkison one-eighth of the proceeds of such sale, whether the same should be money stocks, lands, chattels, or securities of whatsoever kind and Parkison, in consideration thereof, agreed on his part to furnish consultation and his best advice concerning Johnson's invention and improvements, together with all business pertaining thereto at the solicitation of Johnson until such time as a portion or all of said invention or improvements should be sold or disposed of. It was stated that it was the intent of the instrument that Parkison should have one-eighth of all net proceeds of said invention and improvements thereon in return for services already rendered, together with advice and counsel to be given Johnson as therein provided. Parkison, who had for some time prior to the 1st day of August, 1904, been in the employ of James F. Burns, solicited him to purchase said patent; Parkison telling Burns that 'the basis of the whole business was the Johnson grate which nobody could get around. ' Negotiations were had between Burns on one side Parkison and Johnson upon the other, Parkison being the more active of the two, which resulted in a contract between Johnson and Burns on August 1, 1904, which contract contained, among other provisions, the following, in substance:

That as Johnson had invented a certain grate construction for gas producers, furnaces, fire boxes, and other like purposes, and had made application for letters patent thereon, the claims for which letters patent had been approved, and that Johnson was desirous of having said invention transferred to a corporation which should own, hold, and control the same for the purpose of being better enabled to raise funds for introducing, manufacturing, selling, renting, or otherwise handling for profit the said invention, it was agreed between Johnson and Burns that Burns should organize, or cause to be organized, with all possible dispatch, a corporation for the purpose before stated, and Burns was to advance all necessary funds which might be required to organize such corporation, make tests of said invention, Burns to pay, upon the execution of the agreement, $1,000, and within 30 days thereafter the further sum of $4,000, within three months thereafter the sum of $3,500, and within five months thereafter the sum of $3,500, a total of $12,000; and Johnson agreed, immediately upon the issuance of letters patent, to assign and transfer the patent, with all rights, benefits, and privileges accruing thereunder, to Burns or to such corporation. Johnson further agreed that any improvements or inventions appertaining to said invention which apply to any fire box and appliances, or which should be invented or discovered by him, he would assign to said corporation, the corporation to pay all necessary expenses for developing or obtaining any such improvements.

It was further agreed between Burns and Johnson that, upon the organization of the corporation, a certain portion of the stock should be set aside as treasury stock to be sold; that of the remainder Johnson was to receive one-fourth and Burns three-fourths. Immediately thereafter Parkison went into the employ of Burns for the purpose of carrying out the contract, and on the 28th day of December, 1904, the complainant corporation was organized for the purposes of and in pursuance of said agreement between Johnson and Burns. Parkison was a director and business manager of the corporation. Upon the issue of the patent, Johnson transferred the patent, and all interest therein, to the complainant corporation.

On July 1, 1905, Johnson made an application to the United States Patent Office for a patent for improvement in furnaces. The application was allowed, and patent No. 819,228 issued of date May 1, 1906, which was by Johnson assigned to complainant. December 2, 1904, Johnson made application to the United States Patent Office for a patent for an improvement in water cooling grates, which application was allowed, and patent No. 821,500 issued May 22, 1906, which patent was duly assigned to complainant.

Parkison continued as a director and business manager of complainant from the time of its organization until November, 1905. While Parkison was in the employ of complainant as director and business manager, he experimented at complainant's plant in devising an improved grate, which he finally succeeded in perfecting. After he severed his relations with the complainant company, he applied for a patent upon his improved grate, which was granted to him; such patent being No. 828,769. He subsequently applied for another improvement and obtained patent No. 834,932.

Upon leaving the employ of complainant, he immediately, in connection with his brother, E. H. Parkison, and one R. P. Russell, organized the Western Furnace Company, one of the defendants, for the purpose of manufacturing the improved grate under his (Parkison's) patent. It manufactured and sold some of the grates, and on July 17, 1906, complainant filed its bill in this case against said the Western Furnace Company and J. Elmer Parkison, charging them with infringement of its patents before mentioned, and praying that defendants be required to assign the two patents issued to defendant Parkison to it, and for an injunction and an accounting etc. The defendants answered the bill, denying the validity of complainant's patents assigned to it by Johnson, and denied any infringement by them. Upon the hearing complainant's bill was dismissed.

Very much of the evidence and argument on behalf of defendants has been devoted to the charge that complainant's patents were invalid, having been anticipated by prior patents, a large number of which were given in evidence, and that it possessed no novelty. A sufficient answer to this proposition is that as Parkison participated with Johnson in the sale of the patent to Burns for complainant, and Parkison received one-eighth of the consideration therefor, he, and all in privity with him, are estopped from now alleging the invalidity of the patent. Daniel v. Miller (C.C.) 81 F. 1000; Force v. Sawyer-Boss Mfg. Co. (C.C.) 111 F. 902; Time Tel. Co. v. Himmer (C.C.) 19 F. 322; Siemens-Halske Electric Co. v. Duncan Electric Mfg. Co., 142 F. 157, 73 C.C.A. 375.

It is conceded by appellees that this principle of estoppel applies to the assignor of a patent and to those having an interest in the patent itself. It is, however, urged that as Parkison did not have an interest in the Johnson patent, his interest being only to share in the proceeds of the sale, estoppel does not apply to him. Parkison was the principal actor in making the sale to Burns. He had until within a day or two been in the employ of Burns in a confidential capacity. He did not disclose to Burns that he was to derive a benefit from the sale of the patent. He made the sale for Johnson. He received, and still retains, one-eighth of the proceeds from the sale. The estoppel against the assignor is not based simply upon the covenants expressed and implied in his conveyance. It rests upon the broad and equitable doctrine that one who receives and retains a portion of the fruits of a sale of a patent which he has assisted in making to another is estopped from claiming that such patent is invalid and worthless. This principle applies to Parkison as well as Johnson. The equitable garment fits each alike and they must each wear it.

Nor is such estoppel of Parkison to be evaded by his organizing the Western Furnace Company and operating through it. It and his associates interested in said corporation were in privity with him and are equally estopped. Force v. Sawyer-Boss Mfg Co., supra; Siemens-Halske...