Thomson Spot Welder Co. v. Oldberg Mfg. Co.

• Decision Date: 20 March 1926
• Docket Number: No. 25.,25.
• Citation: 207 N.W. 828,234 Mich. 317
• Parties: THOMSON SPOT WELDER CO. v. OLDBERG MFG. CO.
• Court: Michigan Supreme Court

234 Mich. 317

207 N.W. 828

THOMSON SPOT WELDER CO.

v.OLDBERG MFG. CO.

No. 25.

Supreme Court of Michigan.

March 20, 1926.

Error to Circuit Court, Wayne County; Alfred J. Murphy, Judge.

Action by the Thomson Spot Welder Company against the Oldberg Manufacturing Company. Judgment for the plaintiff, and defendant brings error. Affirmed.

Argued before BIRD, C. J., and SHARPE, SNOW, STEERE, FELLOWS, WIEST, CLARK, and McDONALD, JJ.Edmund M. Sloman, of Detroit (Everett H. Wells, of Detroit, or counsel), for appellant.

Stevenson, Butzel, Eaman & Long, of Detroit (Rockwell T. Gust, of Detroit, of counsel), for appellee.

WIEST, J.

October 5, 1915, the United States Circuit Court of Appeals, First Circuit, in a suit in equity, for infringement of letters patent No. 1,046,066, known as the Harmatta patent, held the patent valid. Thomson Electric Welding Co. v. Barney & Berry, Inc., 227 F. 428, 142 C. C. A. 124. January 30, 1917, plaintiff, owner of the patent, by written contract licensed defendant to operate spot and point welding machines under the patent, and defendant agreed to pay specified royalties quarterly. July 13, 1920, this suit was commenced to recover the royalties due up to that date. Defendant, under plea of the general issue, gave notice that the patent was invalid, and therefore the consideration for its undertaking to pay royalties had failed.

October 5, 1920, the District Court of the United States, Eastern District of Michigan, in a suit in equity for infringement, held the patent void for anticipation in the prior art and lack of invention. Thomson Spot Welder Co. v. Ford Motor Co. (D. C.) 268 F. 836. That decision was affirmed June 28, 1922, by the Circuit Court of Appeals, Sixth Circuit. Thomson Spot Welder Co. v. Ford Motor Co., 281 F. 680. This conflict of decisions in the First and Sixth circuits was reviewed on certiorari in the Supreme Court of the United States, and June 2, 1924, that court held the patent void for want of patentable invention, affirming the decision in the Sixth circuit. Thomson Spot Welder Co. v. Ford Motor Co., 44 S. Ct. 533, 265 U. S. 445, 68 L. Ed. 1098.

The suit at bar being for royalties due before decision by the Supreme Court of the United States, may defendant defeat the action on the ground of failure of consideration? The question is not new. It has repeatedly been decided adversely to defendant's contention. We note the fact that at the date of the contract the patent had been held valid in the First circuit, and defendant in the license contract expressly acknowledged the validity of the patent for ‘its remaining term’ and therefore reasons existed for a license contract. While such matters do not govern the rule of law to be applied, they are properly noticeable. At any time previous to the decision of the Supreme Court of the United States, defendant would have repudiated the license contract with some degree of hazard.

In a suit for royalties under a license contract, the licensee cannot set up the invalidity of the patent as a defense. In 30 Cyc. 952, the rule is stated as follows with reference to an assignment of a patent:

‘In the absence of fraud or warranty the assignee of a patent right cannot refuse to make the payments agreed upon merely because the patent is found to be invalid.’

In Havana Press Drill Co. v. Ashurst, 35 N. E. 873, 148 Ill. 115, 139, it was held:

‘The licensee, in a suit to recover the royalties agreed to be paid, will not be permitted to contest the validity of the patent. There is no warrant of such validity implied in a license given thereunder, and proof of its invalidity is no defense to a suit for the promised royalties. Birdsell v. Perego [Fed. Cas. No. 1435] 5 Blatchf. 251;Pope Manfg. Co. v. Owsley [C. C.] 27 F. 100;Bartlett v. Holbrook, 1 Gray [Mass.], 118.’

Jones v. Burnham, 67 Me. 93, 24 Am. Rep. 10, was very much like this case. We quote from the opinion:

‘When this license was given, the plaintiffs were the holders of letters patent issued in due form, and claimed they were valid. At that time controversies were pending for the purpose of testing their validity. A decision of the Circuit Court of the United States had been rendered sustaining the patent. The plaintiffs claimed the right to control the manufacture of the patented article. All these facts were fully known to the defendants, and with that knowledge they procured their license and manufactured under it, in preference to manufacturing in defiance of the patent. An appeal was entered in the case pending in the circuit court, and, upon a hearing before the Supreme Court of the United States, the decision in ...