Rockwell v. New Departure Mfg. Co.

• Decision Date: 25 March 1925
• Court: Connecticut Supreme Court
• Parties: ROCKWELL v. NEW DEPARTURE MFG. CO.

128 A. 302

102 Conn. 255

ROCKWELL v. NEW DEPARTURE MFG. CO.

Supreme Court of Errors of Connecticut.

March 25, 1925

Appeal from Superior Court, Hartford County; William M. Maltbie Judge.

Suit by Albert F. Rockwell against the New Departure Manufacturing Company. From an interlocutory judgment for accounting, both parties appeal. Error in part, and cause remanded.

The defendant was incorporated in 1889 by charter from the General Assembly of Connecticut, with the plaintiff as one of its incorporators. It took over the business of a partnership of which plaintiff was a member engaged in Bristol in the manufacture of doorbells, bicycle bells, and call bells under patents covering inventions originated by plaintiff, and which manufacture and business it continued. On October 28 1889, defendant entered into an agreement with plaintiff by which he was employed as a superintendent and in making and perfecting inventions at $150 a month, and providing that after he should have left its employ, he should transfer to defendant all inventions or improvements in existing inventions pertaining in any way to gongs or bells or machines to make or produce the same, and would do all things necessary to secure patents upon such inventions, and would assign the patents to the defendant. The plaintiff did assign under this agreement existing patents to defendant, and thereafter invented and patented divers inventions which he similarly assigned. Plaintiff continued in this employment until 1891 or 1892, when he left defendant's employ. After about three years he returned to its employ, by vote of the directors, as president in charge of the inventive, mechanical, and manufacturing departments of the company, and continued in the active management of defendant until January 1, 1914.

In 1898 plaintiff invented a back-pedaling brake, and in the same year one Townsend, working as a mechanic under the plaintiff's instruction and supervision, invented a coaster brake or hub, and assigned his rights thereto by agreement with plaintiff to defendant, and later applied for a patent which was not issued until 1907. The Townsend patent was not an invention of plaintiff, and never belonged to him. In December, 1908, defendant, through plaintiff, made a license agreement with P. & F. Corbin Company to manufacture and sell this Townsend invention, to run for three years with the right to renew for three more. Prior to December 6, 1900, plaintiff, while general manager of defendant, invented coaster brake improvements to Townsend's invention, and also a lubricating device, and assigned these to defendant. The plaintiff and his wife owned from 15 to 17 per cent. of the $50,000 of the capital stock of the defendant, of which $18,000 represented assets and the rest good will.

Ever since the organization of the defendant and down to July 1, 1903, the plaintiff had been chief executive and general manager of defendant and its only director with manufacturing experience, and had turned over to it his inventions of a patentable nature, and in many ways originated and carried out methods of production not in any sense patentable. The ability, executive and inventive, of the plaintiff was the foundation upon which the business of the defendant and of its predecessor partnership had been built. Plaintiff's salary was fixed in 1895 at $9,500 a year, but reduced because of poor business in 1898 to $5,000, and so continued on July 1, 1903. In order to obtain more adequate compensation and to secure a greater pecuniary return for his inventive and executive ability, plaintiff instituted negotiations with the directors of defendant with a view to a readjustment of his compensation. The defendant was particularly desirous of retaining for itself plaintiff's services, especially his inventive ability. An agreement dated July 1, 1903, was the result of these negotiations. It was drafted by an attorney named Anderson, a patent lawyer employed by defendant whose employment had been brought about by plaintiff, and who was on terms of intimacy with him. The attorney drafted the agreement under plaintiff's supervision and direction, who gave to the attorney its substance and all knowledge as to its details. Plaintiff's instructions to the attorney were not specific, the details were not gone into, but the purpose of the contract was stated. The attorney submitted a rough draft of the agreement to plaintiff, who approved it, substantially without change, and it was typed and approved by the directors and executed. The attorney acted for both parties, for the defendant through his employment, and for the plaintiff through courtesy and friendship. Plaintiff at this time had no great familiarity with patent law and its terms and phraseology. Neither the attorney nor plaintiff intended the language of the contract to carry an import not apparent on the surface more favorable to defendant than plaintiff. This agreement consists of 11 paragraphs, which are set forth in the accompanying footnote.^[1]

After the execution of this agreement, the salary paid plaintiff remained substantially at the $5,000 named in the agreement, but those of the other officers were greatly advanced; for instance Charles T. Treadway, the treasurer, who received $1,500 a year in 1903, was paid $14,000 in 1914, and Page, who received $1,800 in 1903, was paid $12,000 in 1912. The payment of both royalties and salary to the plaintiff under the agreement of 1903 was intended by the parties as one compensation for his services, whether they resulted in patentable inventions or produced nonpatentable improvements or methods, or were of an executive nature. " The parties did not intend that the provisions of this agreement should be severable, setting on the one hand those portions which vested in the rights to the plaintiff's inventions and the payments to him by way of royalties and commissions, and on the other those portions which relate to his employment, his salary, and the results following from his voluntary withdrawal." The word " embody," when used in the law of patents and used in the patent profession, has this meaning: " A given structure embodies the invention of a patent when it contains the substance and heart of that patent, and irrespective of whether or not there has been an exact copying of every detail." Upon the execution of this agreement defendant paid plaintiff $8,533.95, being the amount therein agreed as due for coaster brakes previously made and sold by it, and after that time defendant paid or offered to pay plaintiff the stipulated royalties on coaster brakes until as hereinafter recited. The net profits of defendant for 1902 were about $50,000, and thereafter increased rapidly. From the execution of the agreement until the latter part of 1913 the plaintiff continued as the moving spirit in the company, was the general manager, a director and for most of this period its president. It was part of his duty as general manager and chief executive to cheapen production of its products by improved shop practices and methods of production. During this period the policies and more important matters concerning defendant were discussed and decided by the board of directors, but the manufacturing ability and experience of the plaintiff and his inventive skill gave him great influence in defendant's affairs. The other directors and officers depended very largely upon him, particularly as regards patents, royalty agreements, and the like, and the success of defendant was largely due to plaintiff's executive, mechanical, and inventive abilities exercised in its behalf. Plaintiff, in 1904, assigned to defendant his entire title and interest to his three coaster brake patents and all rights under two pending applications for patents for improvements in wheel hubs and to an invention he had made of a variable speed coasting and braking hub, and after July 1, 1903, plaintiff invented or acquired a large number of devices and processes for manufacture, and in pursuance of this agreement assigned these to defendant. During many years prior to and after July 1, 1903, and while plaintiff was general manager and the active head of defendant, the inventions of other employees of defendant were by them assigned to defendant without other consideration than their regular salaries.

The Copeland Patent.

One Copeland made application for a coaster brake patent six months before Townsend made his application. In an interference proceeding between the Townsend and Copeland applications the Patent Office awarded priority to the Copeland invention. Thereafter the Copeland patent dominated the industry, and, if held by interests adverse to the defendant, it would have prevented the continuance of defendant's coaster brake business. Copeland's invention, subsequently patented, was owned by the Pope Company, and solely through the efforts of the plaintiff was assigned to defendant, because plaintiff considered that his agreement required him to do so. In so acting plaintiff was not acting individually, but as executive head of defendant from whom came the consideration for the assignment. The Copeland patent was issued to defendant in 1913, and will expire August 5, 1930. This patent was invented by Copeland, and did not include any invention of plaintiff.

coaster brakes.

Since the application of the Copeland invention and down to the time of the trial, the coaster brake made by defendant has been of a structure covered by the Townsend and Copeland patents, and has included as an integral part of its mechanism certain improvements invented by plaintiff and covered by three patents. The licenses to make, use, or sell brakes or coaster brakes granted by the defendants had included rights under patents...