Swindell v. Youngstown Sheet & Tube Co.

Decision Date08 February 1916
Docket Number2676.
PartiesSWINDELL et al. v. YOUNGSTOWN SHEET & TUBE CO.
CourtU.S. Court of Appeals — Sixth Circuit

Stearns Chamberlain & Royon, of Cleveland, Ohio, for appellants.

Hine Kennedy & Manchester, of Youngstown, Ohio, for appellee.

Before WARRINGTON, KNAPPEN, and DENISON, Circuit Judges.

WARRINGTON Circuit Judge.

This is an appeal from a decree dismissing the bill of complaint. It was agreed by the parties to the suit that the question presented by the appeal could be determined without examination of the pleadings and evidence, and, with the approval of the District Court and in pursuance of new equity rule 77, the parties signed a statement of the case with a view of showing how the question arose and was decided below setting forth such of the agreed facts as were deemed essential to a decision of the question here, and so the pleadings were not included. Prior to the submission in the court below it was stipulated that the case should be presented there 'for final hearing upon an application for injunction upon no other issue except one of accord and satisfaction.'

Appellants were seeking to recover $797.18 as a balance of royalties claimed to be due in consequence of alleged construction and use by defendant of four annealing furnaces in accordance with certain letters patent belonging to appellants. From the facts so presented, however, it is uncertain whether the suit was grounded upon the letters patent and alleged infringement, or simply upon the claim for the sum of money stated. Upon the hearing here this uncertainty gave rise to a question of jurisdiction, which resulted in bringing up the pleadings.

The bill and answer are of the ordinary forms employed in patent suits, except that the ultimate issue was whether plaintiffs were entitled or not under the patent to recover damages in the form of fixed royalties, instead of an indefinite sum in the form of profits; and an injunction was prayed restraining defendant from further using the furnaces in question 'until the said defendant shall pay to your orators the said sum of seven hundred ninety-seven dollars eighteen cents ($797.18), additional to the costs herein.'

The plaintiffs were entitled to the selection of the laws upon which they would rely to maintain their suit, and we think the bill shows they invoked the aid and protection of the patent laws; indeed, the suit may be said to have arisen under those laws, notwithstanding the fact that definite royalties, instead of profits were made the ultimate object of the recovery. Healy v. Sea Gull Specialty Co., 237 U.S. 479, 480, 35 Sup.Ct. 658, 59 L.Ed. 1056; Geneva Furniture Co. v. Karpen, 238 U.S. 254, 258, 35 Sup.Ct. 788, 59 L.Ed. 1295; The Fair v. Kohler Dye Co., 228 U.S. 22, 25, 33 Sup.Ct. 410, 57 L.Ed. 716; White v. Rankin, 144 U.S. 628, 635, 12 Sup.Ct. 768, 36 L.Ed. 569; Picture Talking Machine Co. v. The Fair, 123 F. 424, 425, 61 C.C.A. 58 (C.C.A. 7th Cir.); Dunham v. Bent (C.C.) 72 F. 60, 61; Seibert Cylinder Oil Cup Co. v. Manning (C.C.) 32 F. 625, 626. It is scarcely necessary to say that such a suit may be maintained for a sum less than $3,000, in view alike of the proviso to the first paragraph of section 24 of the Judicial Code (see also 36 Stat. 1086, 1091, and Judicial Code, Sec. 256, par. 5), and of the rule of decision settled prior to the enactment of the proviso. Miller-Magee Co. v. Carpenter (C.C.) 34 F. 433, 434, opinion by Circuit Judge, later Mr. Justice, Jackson, approved in Re Hohorst, 150 U.S. 653, 662, 14 Sup.Ct. 221, 37 L.Ed. 1211; Ames v. Hager (C.C.) 36 F. 129, 130; Westinghouse Air Brake Co. v. Great Northern Ry. Co., 88 F. 258, 260, 31 C.C.A. 525 (C.C.A. 2d Cir.); Lewis Blind Stitch Co. v. Arbetter Felling Mach. Co. (C.C.) 181 F. 974, 977. It follows that the court below had jurisdiction.

Upon the issue of accord and satisfaction the District Court, under the facts there presented, found in favor of the appellee. The patent in suit, No. 624,401, was issued to William Swindell, now deceased, and John C. Swindell, May 2, 1899, for an improvement in annealing furnaces. According to the agreed statement of facts the appellee, prior to 1909, constructed and installed 'some of these furnaces,' for which appellee paid to appellants a license fee to use the furnaces. This is made clear by certain admitted allegations of the bill and by part of the correspondence. It there appears that the patentees prior to 1910 constructed and installed at the works of appellee three furnaces for which appellee paid 'certain fees'; and the correspondence shows that another furnace was constructed later for the appellee, but whether by the patentees is uncertain, though it appears that the royalty paid on that furnace (in February, 1906), and also on the earlier furnaces, was $250 each. In 1909 appellee built four additional furnaces, and the royalties claimed in respect of these are the subject of the present controversy. On February 28, 1910, the patentees presented to the appellee an account against it as follows:

'To royalty on four (4) Swindell patent annealing furnaces $250 each, $1,000.00."

This account was presented several times in 1910, once in duplicate, and twice later in the form of 'bill rendered.' A dispute at once arose concerning both the validity of the patent and the claim of infringement; the appellee caused tests to be made of the furnaces and the results reported to the patentees; both sides were advised by counsel, the counsel for the patentees concluding that there was, and counsel for the appellee that there was not, infringement; and this was apart from the question of validity. The dispute was continued through correspondence until December 23, 1910, when the appellee declined to pay the license fees, at least until it should be 'convinced, either by the decree of the court or otherwise, that we are infringing on any part of their (patentees') rights, as a matter of principle. ' After that date the patentees instituted an action in the United States District Court for the Western District of Pennsylvania against George Hagen for infringement of the letters patent, where, on August 27, 1912, the patent was held to be valid and infringed (198 F. 490), and on April 4, 1913, the decree was affirmed (204 F. 442, 122 C.C.A. 628 (C.C.A. 3d Cir.)). On the 15th of July following, the appellee sent a letter to appellants, stating that it understood the patent had been upheld and that it was mailing to them a check 'covering your invoice of February 28, 1910, plus interest at 6 per cent. per annum. ' Inclosed with the letter were the check and a 'voucher,' the check containing these words and figures:

"For payment of your invoice of February 28, 1910 .. $1,000 00

3 years, 4 months, 17 days interest at 6% .........

202 82

----------

$1,202 82"

The accompanying voucher was as follows:

'Received of the Youngstown Sheet & Tube Company twelve hundred two and eighty-two one-hundredths dollars, in full payment of above account. * * * Receipt and return this voucher in envelope provided.'

The letter, with the check and voucher, was received by appellants, who cashed the check and retained the money, but did not sign or return the voucher. Correspondence followed, and on the 6th of August the patentees sent another account for royalty on the same furnaces, but at $500 for each, in all $2,000, crediting thereon the amount of appellee's check, $1,202.82, and so leaving the balance, $797.18, now in issue. This was the first presentation of such an account, and it resulted in further dispute between the parties. The reason assigned by the appellants for so increasing the royalty was because of the 'extensive litigation' which they had 'gone through to establish this patent. ' They claimed in effect that they had seasonably notified counsel for appellee that they 'had established a fixed royalty fee of $500 per furnace. ' Appellee's version of this is that, if the counsel named was so advised, he 'simply accepted this information as information and not in any way as our representative,' insisting that the bill it had paid, with interest, was never 'canceled or withdrawn' to its knowledge; and so it is not open to fair inference that appellee was even notified of the increase in royalty until it received the new account. It is to be observed that this was after it had mailed its check and voucher to appellants. But, whatever the facts may be as to notice, it is certain that the parties never agreed upon the new royalty.

It is nevertheless claimed for appellants that the new 'license fee' 'was liquidated as soon as the complainants made the charge,' and consequently that there was 'no consideration for the waiver of the balance due. ' The new license fee, however, could not be liquidated by the act alone of appellants. The word 'liquidated,' in the sense of the rule relied on by counsel, signifies that the amount claimed has been ascertained and agreed on or fixed by operation of law. Chicago, Milwaukee, etc., Ry. v Clark, 178 U.S....

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