National Cash Register Co. v. New Columbus Watch Co.

• Decision Date: 22 March 1904
• Docket Number: 1,221.,1,220
• Citation: 129 F. 114
• Parties: NATIONAL CASH REGISTER CO. v. NEW COLUMBUS WATCH CO. et al. SAME v. HALLWOOD CASH REGISTER CO. et al.
• Court: U.S. Court of Appeals — Sixth Circuit

129 F. 114

NATIONAL CASH REGISTER CO. v. NEW COLUMBUS WATCH CO. et al.

SAME v. HALLWOOD CASH REGISTER CO. et al.

Nos. 1,220, 1,221.

United States Court of Appeals, Sixth Circuit.

March 22, 1904

Edward Rector, Frank P. Davis, and J. B. Hayward, for appellant.

Paul A Staley and Border Bowman, for appellees.

Before LURTON, SEVERENS, and RICHARDS, Circuit Judges.

LURTON Circuit Judge.

These bills were brought to restrain infringement of patent No 599,625, issued to the complainant, as assignee of Harry M Neer, for improvements in cash registers.

The defendants separately pleaded that the complainant was not the owner of the entire and complete interest in said patent, and that Thos. Reynolds and Oliver W. Kelly were each the owners of an undivided one-third interest in the inventions covered by said patent. Issue was taken upon the said plea, and the cases heard together upon the pleadings and evidence by District Judge Thompson, who sustained the pleas and directed the bills to be dismissed.

The invention involved was completed in July, 1893, and an application for a patent made by the inventor in September, 1893. In July, 1897, Neer assigned his pending application to W. H. Chamberlain, and the latter assigned to the complainant, which prosecuted the application and obtained a patent in February, 1898. When Neer made this invention, and when his application was filed, he was associated with Thos. Reynolds and O. M. Kelly under a contract by which the parties were to develop and finally manufacture cash registers and adding machines. Neer was a man of marked mechanical ability and inventive genius, but was without money or credit. Kelly and Reynolds obligated themselves to pay all expenses of prosecuting his inventions, including cost of patents, etc., and to allow him $10 per week for his individual maintenance. Neer agreed, upon these considerations, to assign to Kelly a one-third interest in every invention he should make while this contract lasted, and to Reynolds a like interest. This arrangement seems to have originated as far back as 1890, and prior to 1893 at least three patents had been taken out by Neer for improvements in cash registers; the patents issuing to Neer and to Kelly and Reynolds, assignees, of one-third each. To better secure his interest in all future improvements Reynolds took from Neer, under date of July 22, 1893, a document in these words:

'July 22, 1893.

'Received of Thos. Reynolds $30.00, in consideration of which I assign to him a one-third interest in all my improvements and inventions in Cash Registers or Adding Machines which I have been working on and yet incomplete. Those completed, those for which application have been made for Pat. or I contemplate making application for Patent upon. In short, it is understood and agreed that he must be given a 1/8 interest in all such patents conceived by me.

Harry Neer.

'Witness, W. M. Wise.

'Recorded Aug. 2, 1893.'

This was recorded in the Patent Office August 2, 1893. The money, thus receipted for was on account of expenses incurred by Neer in the invention here involved.

Neither Reynolds nor Kelly had parted with their equitable interest in this invention when Neer assigned the application in July, 1897, and we agree with the court below in its finding that Kelly and Reynolds were each the equitable owners of an undivided interest in said invention when Neer assigned in 1897, and when the patent issued to his assignees in 1898. The controversy turns wholly upon the question as to whether the complainant company was a bona fide purchaser, without knowledge or notice of this equitable interest of Kelly and Reynolds. This so-called assignment by Neer to Reynolds of July 22, 1893, is undoubtedly valid between the parties, as an assignment of a one-third interest in any future inventions made by Neer. But it was not an assignment of any existing patent or pending application, for Neer had long before assigned a one-third interest in each of his inventions to Reynolds, and the patents had been issued according to the assignment. Neer having by his prior recorded assignments, which did not include improvements, conveyed to Reynolds the one undivided third in all existing patents, and there being no application pending for any patent, there was nothing upon which this document could operate which entitled it to registration as an assignment, grant, or conveyance, under section 4898, Rev. St. U.S. (U.S. Comp. St. 1901, p. 3387); Robinson on Patents, Secs. 411, 769, 785; Wright v. Randel, 8 Fed. 591; Carpenter v. Dexter, 8 Wall. 513, 532, 19 L.Ed. 426; Lynch v. Murphy, 161 U.S. 247, 16 Sup.Ct. 523, 40 L.Ed. 688.

That an assignment of a patent, together with any future improvements thereon, is recordable and operative as a notice to subsequent assignees of patents for improvements, may be conceded. Littlefield v. Perry, 21 Wall. 205, 22 L.Ed. 577; Aspinwall Co. v. Gill et al. (C.C.) 32 F. 697. But none of these former assignments included improvements, so that no question of the effect of such an instrument upon later assignees exists. What we decide is that an instrument which was not intended to convey any present interest in any existing patent is not an 'assignment, grant, or conveyance,' within the meaning of the statute, and that its registration did not, therefore, operate as constructive notice to the complainant company.

Neither do we think the complainants are charged with notice through the knowledge of Chamberlain. Chamberlain was Neer's attorney, and had charge of his application. He was asked to find out whether Neer would sell, and at what price. He bought the application from his client for himself, not disclosing to his client that he was buying for complainant, and then assigned the application to complainant at more than double the price he had paid. In the whole transaction he was acting in his own interest, and in such circumstances there is no presumption that he would disclose his information to his ostensible principal. Thomson-houston Co. v. Capitol Electric Co. (C.C.) 56 F. 849; Pine Mountain Co. v. Bailey, 94 F. 258, 36 C.C.A. 229.

That the complainant did not have technical notice of the equitable interest of Kelly and Reynolds in this invention may also be conceded. The real contention is that it had information of facts which put the company upon inquiry, and that they are therefore chargeable with knowledge of all the facts which inquiry would have disclosed. Cordova v. Hood, 17 Wall. 8, 21 L.Ed. 587; Jonathan Mills Co. v. Whitehurst, 72 F. 496, 19 C.C.A. 130. At the date of the acquisition of this invention by the National Cash Register Company, it had not culminated in a patent. The right to a patent was pending upon a mere application. This application was filed September 9, 1893, and complainants are undoubtedly chargeable with knowledge of the contents of the file bearing upon that application. Mr. Frank J. Patterson, the general manager of the company, and its vice president, actively represented his corporation, and, upon an examination of the application, personally directed its purchase. Some steps to this end had been taken by Mr. Rector, the general counsel of the company at Chicago, and the opinion of local counsel at Dayton was subsequently taken as to the claims, and the value of the invention to the complainant; but neither of these gentlemen had, or in the course of their connection with the matter acquired, any knowledge of facts which would in any degree affect their client. Nor is either of them in the slightest degree chargeable with any negligence or bad faith to their client or any one interested in the matter.

Mr. Patterson was the responsible head of his corporation in respect to all such matters, and was the corporation in all that he said and did about the matter. The result must turn upon his knowledge of facts, and the sufficiency of the facts known to him when he brought this application to cast upon him the duty of inquiry. In February and March of 1893 an effort was made to sell to the complainant patents No. 476,295, of June 7, 1892, 490,304, January 24, 1893, and No. 491,020, of January 31, 1893, issued to Neer and to Kelly and Reynolds, assignees of Neer, for one-third each. Mr. Patterson was first approached and the negotiation opened in behalf of Neer by Mr. A. W. Cochran, a relative of Neer's. Patterson was then distinctly informed that Neer and Kelly and Reynolds were associated together for the purpose of devising an improved cash register, and also adding machines; that Neer was the inventor, and Kelly and Reynolds the capitalists; that Neer was under an engagement to assign to them an undivided one-third interest, each, in all of his inventions while in their employment. Cochran was greatly interested in securing for Neer a more favorable employment than he had with Kelly and Reynolds, and testifies as follows:

'I told them my cousin was a poor inventor, and that Kelly and Reynolds had plenty of money, and he was not liable to get his share of his inventions. Mr. Patterson asked me why I did not bring the machine. I told him the machines were at my house (the two cash registers, one in the metallic case, the other in the wooden case, now before us), but that, if he would come with them on a salary, and they could get the benefit of all his future inventions, of which he had several now in contemplation. Mr. Patterson said 'Yes,' he could see that Harry would not get as much out of it as he would if he had the money to put in it himself, but, of course, Kelly and Reynolds should have the benefits as long as they were furnishing the capital. Q. Did you say anything at that time as to whether Harry Neer could go with the National Company, and give them

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