Thomas A. Edison, Inc. v. Ira M. Smith Mercantile Co.

• Decision Date: 25 July 1911
• Citation: 188 F. 925
• Parties: THOMAS A. EDISON, Inc., v. IRA M. SMITH MERCANTILE CO.
• Court: U.S. District Court — Western District of Michigan

188 F. 925

THOMAS A. EDISON, Inc., v. IRA M. SMITH MERCANTILE CO.

United States Circuit Court, W.D. Michigan, Southern Division.

July 25, 1911

Offield Towle, Graves & Offield and Butterfield & Keeney, for complainant.

James H. Campbell and Wilson, Wilson & Rice, for defendant.

DENISON District Judge.

As to the underlying question presented by this motion, I cannot hesitate to accept, as the now prevailing and general rule established by many familiar cases, the position that a patentee may, by appropriate contract, reserve to himself a control over the price or other conditions attending the public enjoyment of the patented article. Several courts have recognized a tendency to go too far in sanctioning such conditions, and some recent decisions in the Second Circuit as well as the opinions of the Supreme Court in the Bobbs-Merrill Case, 210 U.S. 339, 28 Sup.Ct. 722, 52 L.Ed 1086, and the Dr. Miles Case, 220 U.S. 373, 31 Sup.Ct. 376, 55 L.Ed. . . . , and the granting of the pending certiorari in the Dick Case, ^[1] have tended to indicate that some limits will be placed upon the now customary practice.

As the result of all the decisions on this subject, and in the absence of any pronouncement by the Supreme Court, I think it must be taken as the existing rule that the force of these restrictions, as running with the patented article, depends, in each case, upon the transaction by which the patentee embarked the article upon its voyage. Such transaction is not necessarily unconditional and absolute, because it is denominated a 'sale'; nor is it necessarily any less than a complete sale because denominated a 'conditional sale' or 'license.' Its dominant characteristic is a question of construction in each case. Some analogy may be found in the case of a shipment and delivery of an unpatented article where, afterwards, the vendor claims the title was reserved, and that he may retake the article. There are cases such that even where title and right of reclamation were, in terms, reserved, yet, if the vendee had the right to sell and convey a perfect title and to become merely a debtor to the vendor for the proceeds, the characteristics of a complete sale dominated those of a conditional sale or bailment, and the attempted reservation of title was inefficient.

Applying the above criterion to this case, it would seem that the patentees have rightly apprehended the exact nature of the patent monopoly to make, use, and sell. A sale by the patentee of the patented article which he has manufactured, does not, according to the letter of the statute, exhaust the patentee's monopoly with reference thereto. The purchaser does not, in so many words, acquire a right to use the article or to sell it again; but such right of use, and such right of resale as may be normally appropriate to the article, are implied from the fact of the original sale. This implication may be more or less extensive. It involves the right to repair, but not the right to reconstruct. Accordingly, in this case, the patentees, while they speak, in their jobbers' contracts and dealers' contracts and in their notices on the cartons, of a 'sale,' go on expressly to say that it is a condition of such sale that the article shall not be resold, except for the specified price, and that 'upon any breach of said condition, the license to use and vend this record, implied from such sale, immediately terminates.'

The proper construction of this contract, it seems to me, is that it is not an absolute sale or entitled to be spoken of without limitation as a sale, so that there is no attempt to accompany what is really a perfect sale, by conditions which are repugnant and therefore inoperative. Whether, on the other hadn, it is called a sale upon condition subsequent, or a terminable license, is not important for the...