Standard Sanitary Mfg. Co. v. Arrott

• Decision Date: 28 February 1905
• Docket Number: 61.,60
• Citation: 135 F. 750
• Parties: STANDARD SANITARY MFG. CO. v. ARROTT (two cases).
• Court: U.S. Court of Appeals — Third Circuit

135 F. 750

STANDARD SANITARY MFG. CO. v. ARROTT (two cases).

Nos. 60, 61.

United States Court of Appeals, Third Circuit.

February 28, 1905

Walter Lyon and John R. Bennett, for appellant.

M. A Christy, for appellee.

Before Dallas and GRAY, Circuit Judges, and BRADFORD, District Judge.

GRAY Circuit Judge.

These are appeals from the decrees of the Circuit Court for the Western District of Pennsylvania, in cross-suits in equity. The first was by a bill filed by the appellee, James W Arrott, Jr., complainant below, against the appellant Standard Sanitary Manufacturing Company, defendant below, for the infringement of letters patent No. 633,941, entitled 'An improvement in dredges for pulverulent material,' an appliance for sifting powdered substances. To this suit, the company made answer, setting up two defenses, to wit: (1) Alleged prior knowledge and use of the invention by a person other than the patentee; (2) an alleged contract by Arrott to convey the patent to the company, and consequently an equitable title in the company thereto. Shortly after filing its answer in the original suit, the appellant company filed a cross-bill, setting up its alleged equitable title to the patent and praying a decree for the specific performance by Arrott of his contract to made conveyance thereof. The appellee, Arrott, in his answer to the cross-bill, denied the material allegations, and specifically the existence of any title in complainant, and the making of the contract alleged. The cases were heard together in the Circuit Court, upon the pleadings and proofs. The court below decided that the alleged prior knowledge and use had not been sufficiently proved, and upon the question of equitable title found against the company appellant and in favor of Arrott, the appellee. In consequence of these findings, a decree was entered in the cross-bill for specific performance, dismissing the bill therein, and in the original suit by the appellee, for infringement, a decree was entered granting the injunction prayed for, and referring the case to a master for an accounting. The invalidity of the patent, on the ground of the alleged anticipation, has not been urged before us, so that the only assignments of error with which we are concerned, are those which relate to the equitable title alleged by the appellant in its answer to the infringement suit, and in its bill of complaint praying for a specific performance of an alleged contract to convey the patent.

The appellant, the Standard Sanitary Manufacturing Company, was a corporation created for the purpose of taking over the plant, good will, fixtures and property (including the patents) of several companies, among them the Standard Manufacturing Company (sometimes called the old company), all engaged in the same or similar business. This it did December 31, 1899. The stock of the old or Standard Manufacturing Company, was nearly all owned by James W. Arrott, Sr., father of the appellee, and Francis J. Torrance. James W. Arrott, Jr., the appellee, owned 200 shares, or one-eightieth of the capital stock, and his brother, C. F. Arrott, was also a small stockholder.

We think the learned judge of the court below, in the following extract from his opinion, has fairly summarized the pleadings in both suits, so far as they relate to the alleged equitable title:

'2. In respect to the alleged equitable title of the Standard Sanitary Manufacturing Company to the said patent, the averments of that company contained in its answer to the original bill, and in its cross-bill against James W. Arrott, Jr., are in substance these, namely: That Arrott was a stockholder and director of the old Standard Manufacturing Company, and that while thus interested in that company and employed as its superintendent at its Allegheny City factory, and under his contract was to use his best endeavors to advance the interests thereof and improve and perfect appliances to be used in its business, the improvement constituting the subject-matter of letters patent No. 633,941 was made and reduced to practice and afterwards used in the business of said company, and the expenses incurred in procuring the patent were paid by that company; that said patent was taken and held by James W. Arrott, Jr., in trust for said company, and was used by the said company until the beginning of the year 1900 with the consent of the said Arrott, it being the equitable owner of the improvement and patent; that on December 30, 1890, certain property of the Standard Manufacturing Company, including its plant in Allegheny City, and all its patents, whether held in its own name or in the names of others, were sold to the Standard Sanitary Manufacturing Company; that on the 26th of January, 1900, James W. Arrott, Jr., entered into a contract with the Standard Sanitary Manufacturing Company, by which he was employed as general superintendent of the factory in Allegheny City at an increase in salary, and by which he confirmed to the Standard Sanitary Manufacturing Company the right to patent No. 633,941, and he thereby agreed to assign to that company the said letters patent; that Arrott continued from the date of this contract, January 26, 1900, until about May 19, 1901, as general superintendent of the Allegheny City factory, from which position he resigned on the date last mentioned, and that the right of the Standard Sanitary Manufacturing Company to said letters patent and the use of the improvement was never denied by James W. Arrott, Jr., until after his resignation of said position.

'In his answer to the cross-bill of the Standard Sanitary Manufacturing Company, James W. Arrott, Jr., denies that under his contract with the old Standard Manufacturing Company, he was under any obligation to make inventions for that company, or to transfer to it or hold for its use and benefit any letters patent he might obtain, and denies that that company ever became or was the owner in law or equity of letters patent No. 633,941; he avers the fact to be that the use of said improvement was originally commenced by the Standard Manufacturing Company with his knowledge and consent in the expectation and contemplation of a satisfactory agreement between that company and himself with relation thereto, and that thereafter, to wit, on October 23, 1899, that company through its board of directors expressly recognized his title to said improvement and letters patent, and it was then and there agreed between himself and the company that the company should pay to him for the privilege of using the improvement at its factory a royalty or compensation which should be satisfactory to him, and that thereafter that company used the improvement under and subject to that agreement; he admits that on January 26, 1900, he entered into a contract with the Standard Sanitary Manufacturing Company under which he was employed as general superintendent at the Allegheny City factory, but not at an increased salary, but at the same salary he had formerly received from the Standard Manufacturing Company, and that he continued in the employ of the Standard Sanitary Manufacturing Company under that contract until about May 19, 1901, when he resigned his position and left the company's employ; he denies that by the contract of employment of January 26, 1900, he confirmed to the Standard Sanitary Manufacturing Company the right to the patent No. 633,941, and denies that he thereby agreed to assign said letters patent to said company; he avers that at the time he entered the employ of the Standard Sanitary Manufacturing Company, and thereafter until he left its employ, he was ready and willing to grant to that company a license under his said letters patent to use the improvement upon the payment to him of a satisfactory royalty or compensation therefor, and that he so advised the managing officers of that company; he denies that he ever at any time consented to the use by that company of the said improvement otherwise than under the understanding that he should be duly compensated therefor; he further denies the averment in the bill of complaint that he did not prior to his resignation on May 19, 1901, deny any alleged right of the Standard Sanitary Manufacturing Company to the said letters patent or to the use of the improvement, and avers the fact to be that during his term of employment he gave to that company notice, through one or more of its proper officers, of the said letters patent and his claims thereunder and denied the right of the company to use the improvement without making due compensation to him; and he expressly denies that the Standard Sanitary Manufacturing Company, by the contract of employment of January 26, 1900, or otherwise, acquired any equitable title or interest in or to the said letters patent.'

We agree with the statement of the learned judge, that the answer of James W. Arrott, Jr., is responsive to and traverses all the allegations of the cross-bill, upon which the right of the appellant, the Standard Sanitary Manufacturing Company, to equitable relief depends.

From the testimony on both sides, as fully set out in the record it appears that at the date of the application for the patent, March 21, 1899, to which the appellant claims title, and for several years prior thereto, Arrott, Jr., the appellee, was and had been superintendent of the enameling department and a stockholder and director in the old or Standard Manufacturing Company, engaged in the manufacture of enameled goods, and continued to occupy that position until the latter part of the year 1899, when that company and others engaged in the same business were consolidated, the new company being known as the Standard Sanitary Manufacturing Company, the appellant in these suits. As...