Standard Register Co. v. American Sales Book Co., Equity No. 2078

• Decision Date: 17 July 1944
• Docket Number: 2155,Equity No. 2078,and Civil Action No. 200.
• Citation: 56 F. Supp. 475
• Parties: STANDARD REGISTER CO. v. AMERICAN SALES BOOK CO., Inc.
• Court: U.S. District Court — Western District of New York

56 F. Supp. 475

STANDARD REGISTER CO. v. AMERICAN SALES BOOK CO., Inc.

Equity Nos. 2078, 2155, and Civil Action No. 200.

District Court, W. D. New York.

July 17, 1944.

Bean, Brooks, Buckley & Bean, of Buffalo, N. Y. (Edwin T. Bean, of Buffalo, N. Y., Marston Allen, of Cincinnati, Ohio, and Samuel E. Darby, Jr., of New York City, of counsel), for plaintiff.

Franchot, Runals, Cohen, Taylor & Rickert, of Niagara Falls, N. Y. (Stephen H. Philbin and William J. Barnes, both of New York City, of counsel), for defendant.

KNIGHT, District Judge.

These are three suits by Standard Register Company against American Sales Book Company, Inc., for alleged infringement of patents owned by the plaintiff. The answer in each case presents a defense of unclean hands in that the plaintiff has misused its patents to aid its business in unpatented articles. Upon stipulation it was ordered that the three cases be consolidated for purposes of trial and that there be a separate trial on the defense hereinbefore stated, pursuant to Rule 42 of the Federal Rules of Civil Procedure, 28 U.S.C.A. following section 723c.

Both the plaintiff and the defendant manufacture and sell business forms, or so-called manifold stationery, such as vouchers, invoices, bills of lading and the like. Such stationery is used in typewriters, teletype machines, billing machines and other types of business machines. The stationery is devised in the form of long continuous strips of paper for making original records and if copies are required, copy sheets, with interleaved carbon paper between overlying strips. Each sheet of the strip has marginal feed holes along one or both side margins. The sheets are assembled and folded together in zig-zag packs for use and shipment. This is the type of stationery with which we are concerned here. It is stipulated that for the purpose of the foregoing defense such stationery forms are not patented.

Both the plaintiff and the defendant supply different feeding devices to cooperate with the margin feed holes to propel the paper through the machine and secure the right alignment. Plaintiff's feeding device is a platen attachable to a typewriter, or other above-stated machines, with a series of retractable pins at each and for engaging the marginal holes along the edges of the forms. This platen fits into a typewriter, tabulator or other type of similar machine in place of a roller. The patents in suit relate to this platen, and it is referred to herein as a "registrator platen." The feeding device of the defendant is in the nature of an attachment which is added to the machine without disturbing the platen already in the machine, and defendant's attachment is usable on the machine with the plaintiff's device by the adjustment of the platen so that the pins are inoperative. While the plaintiff's platen was designed to meet the specific physical characteristics of the plaintiff's stationery, and it does not appear that the stationery of any other company has been used or attempted to be used in plaintiff's device, it is apparent that it is physically possible for any one to copy the form stationery of the plaintiff and use plaintiff's platen without alteration. Plaintiff does not sell these platens to its form customers but "loans" and "licenses" them to customers upon an agreement, among other things, containing this provision:

"This License shall continue only so long as the User purchases from the Owner or its authorized representatives, * * * marginally punched stationery or continuous form material for use on the devices licensed hereby in lots totalling minimum gross price of Fifty ($50.00) Dollars per order, and not less than Fifty ($50.00) Dollars per year for each feeding device licensed hereunder and only so long as no continuous form material or marginally punched forms obtained elsewhere than from Owner and/or its authorized representatives is used by User with the licensed property. But nothing herein shall be deemed to restrict the User in the purchase of continuous manifolding form material from others than Owner, or to limit the User in the purchase, lease or license of feed aligning devices of others excepting that no license is to be implied hereby under the patents referred to in Schedule One as to such products of others."

Defendant and other competitors of plaintiff, engaged in the manufacture of form stationery, "license" or "loan" their feeding devices under a comparable provision. The reasons for this are obvious, but they have no bearing on the question of the right to limit the use of the patented platen to the particular form stationery manufactured or provided by it.

Plaintiff seeks to distinguish the effect of a "loan" or "lease" agreement from a "sale." It says that if it had sold the patent and tried to restrict its use, that would have been illegal, because when a device is sold the purchaser has the right to use it for anything he wants and do anything he wants with it, but where it "loans" or "leases" a patented article, as here, the customer can use it as long as he uses material supplied by the plaintiff.

It seems to me that the plaintiff makes a distinction without difference in its effect. The rule stated in Carbice Corp. v. American Patents Corp., 283 U.S. 27, 51 S.Ct. 334, 75 L.Ed. 819, and followed in International Business Mach. Corp. v. United States, 298 U.S. 131, 132, 56 S.Ct. 701, 80 L.Ed. 1085; Leitch Mfg. Co. v. Barber Co., 302 U.S. 458, 58 S.Ct. 288, 82 L.Ed. 371; Morton Salt Co. v. G. S. Suppiger Co., 314 U.S. 488, 62 S.Ct. 402, 86 L.Ed. 363; Mercoid v. Mid-Continent Investment Co., 320 U.S. 661, 64 S.Ct. 268; American Lecithin Co. v. Warfield Co., 7 Cir., 105 F.2d 207; and other cases, is applicable here. The question is whether the limitation in the license agreement constitutes such a misuse of the patented device as to promote the sale of the stationery, and it makes no difference whether it is a sale, an exclusive license or a loan or lease. The customer here in order to retain plaintiff's device is required to buy plaintiff's stationery.

Whether one sells a patented device and seeks to limit its use to an unpatented product of the patentee, or whether one leases a patented device and makes the lease dependent on the use of leasor's unpatented material...