Parker Rust-Proof Co. v. Allen

• Decision Date: 14 May 1925
• Docket Number: No. 137,October Term, 1924.,137
• Citation: 231 Mich. 69,203 N.W. 890
• Parties: PARKER RUST-PROOF CO. v. ALLEN.
• Court: Michigan Supreme Court

231 Mich. 69

203 N.W. 890

PARKER RUST-PROOF CO.

v.ALLEN.

No. 137, October Term, 1924.

Supreme Court of Michigan.

May 14, 1925.

Appeal from Circuit Court, Wayne County, in Chancery; Geo. O. Driscoll, Acting Circuit Judge.

Suit by the Parker Rust-Proof Company against William H. Allen. Decree for defendant on his cross-bill, and plaintiff appeals. Modified and rendered.

Argued before McDONALD, C. J., and CLARK, BIRD, SHARPE, MOORE, STEERE, FELLOWS, and WIEST, JJ.

Moore and Bird, JJ., dissenting.

Angell, Turner & Dyer, of Detroit, for appellant.

James M. Cleary, of Detroit (Frank C. Sibley, of Detroit, of counsel), for appellee.

FELLOWS, J.

This bill was filed to secure the assignment to plaintiff of four letters patent held by defendant. They are as follows: No. 1,290,476, for which application was filed January 8, 1917, and issued January 7, 1919, No. 1,321.182, for which application was filed May 10, 1917, and issued November 11, 1919, No. 1,341,100 for which application was filed November 18, 1918, and issued May 25, 1920, and No. 1,329,573, for which application was filed September 25, 1919, and issued February 3, 1920. The first three of the patents named are improvements on and aids to plaintiff's process of rust proofing. They pertain to its process, and are styled by defendant in his testimony as ‘protective’ patents. He also testified that he was employed to protect the Parker business. There can be no doubt upon this record that these patents are protective of the Parker business; they were all applied for when defendant was in the employ of plaintiff for the purpose stated, and was receiving a salary of $3,900 a year from plaintiff, which, as disclosed by this record, was greater than he ever before received in his life. The other patent is the so-called ‘rusticide patent.’ It covers the application of a rust-proofing compound while cold. It was applied for after defendant's salary had been reduced to $2,000, but while he was still in plaintiff's employ. While it was actually discovered at the laboratory of the College of Pharmacy, he had been experimenting with it for a long time at the Parker plant. I do not understand the rule to be that one employed as an inventor and paid a salary as such may, because the successful idea comes to him when away from the plant. appropriate to himself the invention or sell it to the competitor of his employer. But I think this record fairly discloses that defendant called attention of the officers of plaintiff to the rusticide process, and was willing to turn it over to the company, but that they, either through failure to give it proper attention or otherwise, took no interest in it, and gave defendant to understand they did not want it, and that thereafter he entered into engagements with others so as to estop plaintiff from now insisting on the assignment to it of this patent. For this reason, I agree with Justice MOORE that defendant should retain the rusticide patent.

As to the other three patents, those which are protective of the plaintiff's business, and which pertain solely to its process, which defendant was employed to perfect and protect, I discover no good reason for withholding them from plaintiff and giving them to defendant, thereby permitting him to harass plaintiff or sell them to its competitors. And upon this branch of the case, I think it is unimportant whether befendant knowingly executed the contract of December 6, 1915, or was employed as he testifies to protect the Parker business. If he knowingly signed the contract of December 6, 1915, he is bound by its terms to assign these patents to plaintiff. If he was employed as he swears he was to protect the Parker business, and to perfect and improve plaintiff's process by patents which he himself styles ‘protective’ patents, and has been paid therefor, as he has been, then plaintiff is entitled to these patents.

I take but little stock in defendant's claim that he did not know what he was signing when he signed and acknowledged before a notary public the contract of December 6, 1915. He claims it was brought to him by Mr. Parker, and that he took it to a notary public and acknowledged it before him. While in some of his testimony he claims he does not remember any of the conversation between him and Parker, in another part he claims that he supposed it was to ‘cover an assignment of a couple of patents.’ The notary public before whom it was acknowledged, while not recollecting the circumstances, testifies from his universal custom that he either read the paper over to defendant or ascertained that he knew its contents. While placing some credence in this claim of defendant, the trial judge also found that the $5,000 of stock provided for in the contract had never been issued to the defendant. In this the trial judge was clearly in error. He was doubtless confused on the subject. The undisputed evidence showed that a certificate for $5,000 of stock was issued to defendant. Later, the capitalization of the company was reduced one-half, and he surrendered his certificate, and a new one was issued for $2,500; and the certificate for this stock and some other defendant had purchased was produced by him in open court, and is an exhibit in the case. In addition to this $5,000 of stock, there was also issued to defendant $20,000 more of stock of the company, called bonus stock. This is possibly what led to the confusion in the mind of the trial judge. Under an order of the securities commission, this stock was deposited in escrow. When the capital of the company was reduced, the certificate was surrendered, and a new one for $10,000 was issued to defendant, and this was likewise deposited in escrow. When it was released from escrow, it was sent to the plaintiff, and its officers are and at all times have been willing to deliver this stock to defendant when he executes an assignment of the patents which belong to plaintiff, and which now stand in his name. It seems strange that the company would issue and the defendant receive the $5,000 of stock provided for in this contract without some knowledge of the contents of the contract on defendant's part.

But if defendant did execute and acknowledge before a notary public this contract without knowledge of its contents, and he was employed as he claims he was, and as I have pointed out, to protect the Parker business, and while so employed obtained in his own name these three patents which he admits are protective of the Parker business, there is no sound reason for withholding from plaintiff these patents, which they have already paid for, and which he took in his own name, but under the terms of his employment, for plaintiff's use and benefit. Before difficulties arose he had assigned to plaintiff other similar patents which were taken out in his name, and by so doing recognized his understanding of his contract with and his duty to the company which employed and paid him. Upon the facts in this case, I perceive no equity in a decree which gives defendant the rusticide patent, the $10,000 bonus stock, and at the same time withholds from plaintiff the three patents, which, as matter of law and matter of equity, it is entitled to. I think a decree should be entered in this court requiring defendant to assign these three patents to plaintiff, confirming defendant's title to the rusticide patent, and requiring plaintiff to deliver to defendant the $10,000 of bonus stock.

McDONALD, C. J., and WIEST, STEERE, SHARPE, and CLARK, JJ., concurred with FELLOWS, J.

MOORE, J. (dissenting).

The bill of complaint is filed in this case to compel defendant to assign to plaintiff certain patents. Defendant filed an answer in the nature of a cross-bill asking for affirmative relief. The bill of complaint was dismissed, and a decree granting the relief prayed and the cross-bill was granted. The case is brought into this court by the plaintiff on appeal. The bill of complaint was filed April 4, 1923. The plaintiff company was organized August 23, 1915. It succeeded Mr. Clark W. Parker, who was made its first president.

We quote some correspondence that is important:

Letter from Clark W. Parker to defendant, dated May 18, 1915:

‘May 18, 1915.

‘Mr. W. H. Allen, 234 Hubbard Ave., Detroit, Mich.-Dear Sir: In consideration of your having assigned to me your invention and improvement in rust-proofing of metals, and also of the future assignment to me of any further inventions and improvements you may have or may hereinafter make in the process of rustproofing, I agree to pay you a salary of not less than $15 per week so long as you may assist me in this matter. This is with the understanding that I will increase your weekly salary as soon as the profits of this business will warrant me doing so, and further if the business of the Parker Rust-Proof Company develops into a paying business as a result of your efforts, I will see that a further remuneration is given you. The amount and character of this additional remuneration is to be decided by me, and I will decide in accordance to the success of the business to which your efforts may have to do with.

‘Trusting that this is according to our understanding and is satisfactory to you, I remain,

‘Yours very truly,

‘CWP/EE.’

‘Assignment, dated October 23, 1915, from Clark W. Parker to Parker Rust-Proof Company: For and in consideration of the sum of $1 to me in hand paid, and in further consideration of an amount of the capital stock of the Parker Rust-Proof Company of America, a corporation of the state of Michigan, having par value of the sum of $50,000, and other good and valuable considerations, the receipt whereof is hereby acknowledged, I, Clark Warner Parker, of Detroit, Wayne county, Michigan, do hereby sell, assign, and transfer unto said Parker Rust-Proof Company of America, the entire right, title, and interest in and to certain new and useful improvements in processes for rust-proofing iron and steel,...