Pope Mfg. Co. v. Owsley

• Decision Date: 01 January 1886
• Citation: 27 F. 100
• Court: U.S. District Court — Northern District of Illinois
• Parties: POPE MANUF'G CO. v. OWSLEY. (Bill.) [1] OWSLEY v. POPE MANUF'G CO. (Cross-bill.)

27 F. 100

POPE MANUF'G CO. v. OWSLEY. (Bill.) ^[1]

OWSLEY v. POPE MANUF'G CO. (Cross-bill.)

United States Circuit Court, N.D. Illinois.

1886

Coburn & Thacher, for complainant.

West &amp Bond, for defendants.

BLODGETT J.

The original bill in this case alleged that on the sixth day of October, 1879, complainant entered into an agreement in writing with the defendants, then doing business under the firm name of the St. Nicholas Toy Company, which agreement is annexed to the bill, and made a part thereof, as Exhibit B in which agreement it is recited that complainant 'owns and controls certain letters patent of the United States for the inventions therein set forth and described, enumerating eleven patents, and that defendants 'are desirous of securing license and authority to work under said patents and make and sell the inventions therein described. ' Wherefore it is agreed:

'(1) The complainant licenses defendants, subject to conditions in said agreement contained, to make, use, and sell, to the full end of the term for which each of said letters patent were granted, wooden bicycles whose wheels do not exceed fifty inches, made principally of wood, embodying in their construction or mode of operation the inventions or improvements shown or described in each, all, or either of said letters patent.

'(2) The defendants agree to make full and true returns in writing to complainant, on or before the tenth day of each calendar month in each year, of all bicycles containing said improvements so manufactured by them during the month preceding, and the name or names of any or all purchasers of the same, and to pay the royalty or license fee accruing thereon, on or before the said tenth of each of said months; and to keep full, true, and books of account, open at all reasonable times to the inspection of the complainant, in which shall be entered and set down all velocipedes made and sold by them; and to mark each machine sold 'Patented;' and to pay complainant as license fee or royalty upon each and every bicycle whose wheels do not exceed 42 inches in diameter, $1, and upon each one whose wheels exceed 42 inches, and do not exceed 50 inches, $2, so manufactured and sold by the defendant, containing the improvements set forth and described in said letters patent, or either of them.'

Defendants also agreed that they would not make or sell any bicycles other than those having wooden wheels, and not of greater diameter than 50 inches; 'nor in any manner, directly or indirectly, violate or infringe upon said letters patent, or either of them; nor dispute or contest the validity of the same, or of complainant's title thereto,' and in case the defendants should violate any of the provisions contained in the said agreement on their part, the plaintiff might terminate said license by notifying the defendants in writing that their said license had been revoked. The bill then avers similar agreements or licenses made between the same parties, one bearing date July 16, 1881, two dated November 1, 1881, and one dated February 3, 1882, and enumerating different patents as owned by the complainant, and licensing the defendants to make bicycles and velocipedes of different sizes and construction, and baby carriages, with wire wheels and rubber tires; all of which licenses contain substantially the same provisions as to payment of royalties or license fees called for by each of them, the making of monthly reports, the keeping of books, the agreement of defendants not to contest or dispute the validity of the letters patent enumerated in the licenses, and the provision for the termination of licenses by the complainant in case of default by defendants, such as are contained in Exhibit B; copies of all these licenses being attached as exhibits to the bill, and made a part thereof; Exhibit B enumerating 11 patents; and Exhibit G, 12 patents,-- as owned and controlled by complainant, describing such patents by their official numbers, dates, and the names of the persons to whom they were respectively granted, and describing some of them as reissues. The bill then charges that defendants, acting under the said licenses, made monthly reports and paid royalties as called for by the respective instruments, up to the first of March, 1883, when they refused to pay any more royalties, refused to make any more reports, and although there is no specific or direct allegation that defendants still continued to manufacture articles on which they should report and pay royalties as provided by said licenses or agreements, yet it is indirectly so stated. It is also stated in the bill that the defendants are making and selling velocipedes and bicycles of different sizes and construction than were allowed by their license, in violation of their covenants contained in said license or agreement that they will not make any other bicycles or velocipedes or wheels than such as are described and authorized by the licenses. The prayer of the bill is for a discovery of the number of bicycles and wheels for the baby carriages made by defendants in accordance with and under the provisions of the several licenses mentioned since they have failed to make their monthly reports, as called for by said agreements; that they be decreed to make reports in writing, and to pay the license fees found due; and also for an injunction restraining the defendants from selling any velocipedes, bicycles, or wheels specified in the several licenses without affixing or stamping thereon the word 'Patented;' and also that the defendants be enjoined and restrained from making or selling bicycles or other machines described in the said licenses of different construction from those which they are allowed to make and sell by virtue of their several licenses.

Defendants, by their answer, admit the making of the agreements, and the making of reports and payment of royalties up to and including the month of February, 1883; and their refusal to make such reports and pay royalties since that time. They allege, by way of defense, that the several licenses were obtained from them by fraud; that several of the patents mentioned in the licenses were null and void at the time said licenses were granted; that the machines manufactured and sold by the defendants are not covered by any of the said patents, and do not infringe the same; and that the complainant has declared the licenses forfeited; whereby the defendants claim to be released from all obligation assumed by them in said agreements or licenses. Defendants have also filed a cross-bill, in which they seek to have the agreements or licenses in question set aside on the ground that they were obtained by fraud, the fraud charged mainly consisting in the fact that one of the patents enumerated in the licenses had expired at the time the licenses were taken, and others were very nearly expired, but by stating the date of the reissue, instead of the date of the original patent, defendants were induced to believe that the said patents had a much longer time to run than they in fact had; that several of the reissued patents were void by reason of enlarged claims; and that defendants were intimidated by threats of law-suits and injunctions into taking said licenses, and making the agreements therein contained; also that the machines made by the defendants do not infringe the claims of either of said patents, when said patents are properly understood and construed by the state of the art; and, further, that two of said patents have been declared void by a court of competent jurisdiction since said agreements were made. The prayer of the cross-bill is that the agreements be set aside, and the defendants released from all obligation to observe the same, and for an injunction restraining the defendants in the cross-bill from asserting said patents as against the complainants in the cross-bill.

The original bill alleged the making of another agreement described as 'Exhibit A,' and another is described as 'Exhibit I;' but as the proof shows that defendants were released from the payment of royalty under Exhibit A at the time the same was made; and its only purpose seems to have been for the settlement of past claims; and that Exhibit I contained a clause allowing the defendants to revoke or cancel the same, of which they availed themselves soon after this bill was filed,-- it is not deemed necessary to consider them further.

Soon after the filing of the original bill, on motion of complainant, an injunction was ordered unless the defendants should file a bond in the penal sum of $12,000, conditioned for the payment of royalties, with interest and such damages as the court should find on the hearing had accrued up to the date of the order; and also that the defendants should report to the complainant each month after the date of the order the number and kind of machines made by them under the several licenses held by the defendants from the complainant, and pay into court, or to complainant, the royalties accruing after the date of such order. Defendants filed the bond called for by this order, and have reported from month to month in pursuance thereof, and no exception has been taken to the correctness of these reports.

The first, and, substantially, the only, question raised by the...