People ex rel. Edison Elec. Illuminating Co. of City of Brooklyn v. Bd. of Assessors of Brooklyn

• Decision Date: 04 October 1898
• Citation: 51 N.E. 269,156 N.Y. 417
• Parties: PEOPLE ex rel. EDISON ELECTRIC ILLUMINATING CO. OF CITY OF BROOKLYN v. BOARD OF ASSESSORS OF CITY OF BROOKLYN.
• Court: New York Court of Appeals Court of Appeals

156 N.Y. 417

51 N.E. 269

PEOPLE ex rel. EDISON ELECTRIC ILLUMINATING CO. OF CITY OF BROOKLYN

v.BOARD OF ASSESSORS OF CITY OF BROOKLYN.

Court of Appeals of New York.

Oct. 4, 1898.

Appeal from supreme court, appellate division, Second department.

Certiorari by the people, on the relation of the Edison Electric Illuminating Company of the City of Brooklyn, against the board of assessors of the city of Brooklyn, to vacate an assessment of relator's capital stock. From an order of the appellate division (46 N. Y. Supp. 388) affirming an order of the special term vacating the assessment, defendant appeals. Affirmed.

Almet F. Jenks, for appellant.

Frank Harvey Field and Edward M. Shepard, for respondent.

PARKER, C. J.

Whether, under the taxing power of the state, patent rights may be assessed, has not been passed upon by this court. The question was referred to as an important one in People v. Barker, 139 N. Y. 55, 34 N. E. 722, but the court found that it was not necessary to decide it in order to dispose of the case, and so declined to consider it. The result of our present examination leads to the conclusion that, while the question has not been heretofore considered by this court, it cannot, after all, be said to be an open one, for it was long ago asserted by the supreme court of the United States that patent rights were not taxable by the states; and the doctrine has been recognized so often since that it must be fairly regarded as settled in that court. And if we are right in that assumption, then it is the duty of this court to follow it. The argument in support of the doctrine may be briefly stated as follows: The constitution of the United States (article 1, § 8, subd. 8) conferred upon congress the power to ‘promote the progress of science and useful arts, by securing for limited times, to authors and inventors, the exclusive right to their respective writings and discoveries.’ In pursuance of this power, congress enacted that patents should be issued to inventors, which should secure to them for a limited term the ‘exclusive right to make, use and vend the invention or discovery through the United States and the territories thereof.’ Rev. St. U. S. § 4884. Patent rights are, therefore, granted under the federal constitution, and necessarily for the promotion of federal purposes. Grant v. Raymond, 6 Pet. 218, 241;Ames v. Howard, 1 Sumn. 482, Fed. Cas. No. 326;Blanchard v. Sprague, 3 Sumn. 535, Fed. Cas. No. 1,518. The federal purpose is primarily to stimulate genius, talent, and enterprise by holding out that encouragement which patents give, but ultimately to secure to the whole community the great advantages that flow from the free communication of secrets, processes, and machinery. The next step is that, patent rights being created under the federal constitution and laws for a federal purpose, the states are without the right to interfere with them. The right to tax a federal agency constitutes a right to interfere with, to obstruct, and even to destroy the agency itself, for, conceding the right of the state to tax at all, then it may tax to the point of destruction. This doctrine is elaborately discussed by Chief Justice Marshall in the U. S. Bank Case (McCulloch v. Maryland, 4 Wheat. 316), wherein the court decides that congress has power to incorporate the bank as a federal agency, and that, having done so, the state cannot tax the bank upon its circulation. The latter proposition is regarded as a necessary conclusion from the former. The federal government having the right to create the agency, it necessarily has the right to protect it, not only from destruction, but from interference from any other government, whether such interference be in the guise of taxation, or otherwise, as the power to tax involves the power to destroy, and the power to destroy may render useless the power to create. In the course of his opinion, Chief Justice Marshall said: ‘If the states may tax one instrument employed by the government in the execution of its powers, they may tax any and every other instrument. They may tax the mail; they may tax the mint; they may tax patent rights; they may tax the papers of the custom house; they may tax judicial process; they may tax all the means employed by the government,-to an excess which would defeat all the ends of government.’ The criticism upon this argument, as now made, is that patent rights were not properly classified with taxing the mail and taxing the mint, for while the latter constitute a means of government, patent rights do not; that the granting of patents by the government is not necessary to the execution of its powers, but constitutes merely a privilege to a person to exclusively practice or exploit his inventions for his own benefit, a privilege which, if it prove of value, should bear its proportion of the public burdens in the political division having jurisdiction of the person and property of the inventor. But whether or not patent rights were properly included with the mails and the mint and judicial process as a means of government, and thus exempted from interference by the taxing power of the states, it is clear that from the time of the decision in the U. S. Bank Case until now, wherever the courts, whether state or United States,...