Peck v. Standard Parts Co.

• Decision Date: 21 July 1922
• Docket Number: 3640.
• Parties: PECK v. STANDARD PARTS CO.
• Court: U.S. Court of Appeals — Sixth Circuit

282 F. 443

PECK v. STANDARD PARTS CO.

No. 3640.

United States Court of Appeals, Sixth Circuit.

July 21, 1922

Chas L. Byron, of Chicago, Ill. (William J. Peck, of Peoria, Ill and George L. Wilkinson, of Chicago, Ill., on the brief), for appellant.

Bert M Kent, of Cleveland, Ohio (Tolles, Hogsett, Ginn & Morley, of Cleveland, Ohio, on the brief), for appellee.

Before KNAPPEN, DENISON, and DONAHUE, Circuit Judges.

DENISON Circuit Judge.

The Hess Pontiac Spring & Axle Company (hereafter called the Pontiac Company, or the employer) was engaged in manufacturing springs for the Ford automobile, and desired automatic machinery for such manufacture. Having already acquaintance and some business relations with Wm. J. Peck, of Peoria, Ill., who was a designer of machinery and a solicitor of patents, and a lawyer practicing in patent cases, the Pontiac Company, as first party, entered into a written contract with Peck, as second party, which was signed August 1915, and the body of which is as follows:

'This agreement witnesseth: That second party is to devote his time to the development of a process and machinery for the production of the front spring now used on the product of the Ford Motor Company. First party is to pay second party for such services the sum of $300 per month. That should said process and machinery be finished at or before the expiration of four months from August 11, 1915, second party is to receive a bonus of $100 a month. That when finished second party is to receive a bonus of $10 for each per cent. of reduction from present direct labor, as disclosed by the books of first part.'

Peck proceeded under the contract, and eventually developed, and there were manufactured, a series of machines which produced these springs to the satisfaction of the Pontiac Company. One of the series, known as No. 9, completed the forming of a spring leaf and gave it an oil bath. The compensation provided by the contract was paid. Later the Pontiac Company, with Peck's active participation, manufactured and put into production five more of the No. 9 machines. Still later, the Standard Parts Company took over all the property and business of the Pontiac Company and became its commercial successor. It proceeded to build and install four more of the No. 9. In the meantime Peck had been negotiating with the Pontiac Company and its successor for a permanent contract for his expert services, and had obtained a patent upon this particular machine; this patent being No. 1,249,473, issued December 11, 1917, to him upon a 'forming and quenching machine.'

The negotiations for a satisfactory general contract failed, and thereupon Peck brought this action in the court below. It was in the usual form of an infringement bill. The defendant answered, relying wholly upon its rights under the contract of August, 1915, by virtue of which it claimed equitable title to the patent in suit; and the answer proceeded, in the nature of a cross-bill, to set up the facts more fully, and to ask a decree that the plaintiff be compelled to convey to it the legal title. After a hearing upon proofs duly taken, the court fully sustained the defendant's position, and made a decree directing that the bill be dismissed, and that the patent be conveyed to defendant, as prayed by the cross-bill.

The primary question in the case is as to the legal effect of the contract. In its discussion it is to be taken as the starting point that where an employee, under merely a general contract obligation to devise such improvements as he can in the employer's machines, processes, or product, makes such an improvement, developing it upon the time and at the expense of his employer, and the improvement involves a patentable invention, the invention and patent belong generally to the employee, while the employer has a license, the extent of which depends upon the facts of the case. Hapgood v. Hewitt, 119 U.S. 226, 7 Sup.Ct. 193, 30 L.Ed. 369. It is equally clear that where there is an express contract, appearing with sufficient certainty and reasonably limited to the subject-matter, giving such inventions and patents to the employer, it is valid and will be specifically enforced. Mississippi Co. v. Franzen (C.C.A. 3) 143 F. 501, 74 C.C.A. 135, 6 Ann.Cas. 707.

The question now for determination is whether there is an exception to the universality of the first rule, by which, though in the absence of any express contract or distinct understanding that the patent shall belong to the employer, that result will follow as a matter of law from some particular contracts of employment. The supposed exception was formulated by Mr. Justice Brown in Gill v. United States, 160 U.S. 426, when he said on page 435, 16 Sup.Ct. 322, on page 326 (40 L.Ed. 480), after stating the general rule that ordinarily the inventions and patents of the employee for improvements in the machine with which he is connected belong to him:

'On the other hand, it is equally clear that, if the patentee be employed to invent or devise such improvements, his patents obtained therefor belong to his employer, since in making such improvements he is merely doing what he was hired to do.'

If this is to be taken as an accurate statement of the existing rule of law, it applies to the situation here involved and justifies the decree below. Whether it should be so accepted is a question of great general importance, which has received careful consideration in only one reported case, and which we think justifies a full discussion.

In the dearth of actual authority, the situation invites thought as to the underlying principles and reasons. If one is hired in a general supervising or advisory capacity-- as was Hewitt in the Hapgood Case-- and it is expressly understood that he is to devote his talents and skill to making improvements, and if, in the course of developing such improvements, he makes a patentable invention therein, there would be strong ethical grounds for saying that the invention belonged to the employer, just as did the other fruits of the labor and skill which had been bought and paid for; but the contrary view has prevailed, and has become the settled law. The approved principle-- although it is not fully developed in the Hapgood Case-- perhaps is that such a contract commonly contemplates, and is fully satisfied by, that body of devices and improvements and betterments which are the product of mere skill; that all these things the employer indisputably obtains for the benefit of his business, and they justify the price which he has agreed to pay; that for the employee to go beyond such skill and make a patentable invention is the unusual and abnormal thing; and that for the employer to get, not only the benefit of the improvements in his business, but to get also a monopoly whereby all others can be excluded for a period of years, is also a thing not normally to be anticipated, and particularly is this so when the patent extends, as it often or usually will, to a monopoly reaching into many other lines of business, and just as far as the patented device could be usable. In this view there is satisfactory reason for saying that, if the entire invention and all its possible exploitation are to be taken away from its primary owner and transferred to the employer, that result ought to be expressed in the clearest and plainest words, and ought not to be left to uncertain implications from duties and conduct.

We think that this idea, substantially as thus stated, is the foundation principle of the whole inquiry. It does not follow that, because the employer does not get everything, he gets nothing. The existence of the license which the courts have declared in this situation is only the result of determining the intent of the parties from their relations and conduct, whether it be based on the doctrine of implied contract, following out the real intent, or on that of estoppel.

Further inquiring as to matters of the principle involved: Is there any reason why a contract to devise one specific improvement should be made an exception to the rule which is applied to contracts to devise improvements of a specific class? In other words, while we recognize the general rule that Hewitt, employed to devise and make improvements in the plows manufactured by the Hapgood Company, became the owner of an invention which he made in such plows, and with only a license to the employer, is there any logical basis for saying that Clark (in the Solomons Case, infra), whose duty was to devise a self-canceling stamp and who made an invention therein, took nothing under his invention, but the employer took the whole title, instead of a license? We have not found, in any of the cases, any reason suggested for such a distinction; nor do we observe any. Surely the reason that the fruits of the inventive skill have been bought and paid for, if it were a good reason, would deny the general rule as well as support the exception. Nor can any theory of estoppel uphold the exception, as distinct from the rule. Ordinarily, every equity in the employer created by estoppel will be completely satisfied by a license; and, if estoppel could lead to a right to have the patent conveyed to the employer, that result would follow as well in contracts of general employment as with contracts to devise a particular thing. Indeed, after examining, as we think, every reported federal case on the subject, we find only two in which the principles of estoppel are, or may be, relied upon to support a decree giving title to the employer; and in both of those the employment was general, not specific. National Co. v. Healy (C.C.A. 7) 189 F. 49, 110 C.C. 613; Dowse v. Federal Co. (D.C.) 254 F. 308, 316.

Nor can we think that the exception...