Thorn Wire Hedge Co v. Washburn Moen Manuf Co Washburn Moen Manuf Co v. Thorn Wire Hedge Co

• Decision Date: 11 November 1895
• Docket Number: Nos. 57 and 58,s. 57 and 58
• Citation: 16 S.Ct. 94,40 L.Ed. 205,159 U.S. 423
• Parties: THORN WIRE HEDGE CO. v. WASHBURN & MOEN MANUF'G CO. WASHBURN& MOEN MANUF'G CO. v. THORN WIRE HEDGE CO
• Court: U.S. Supreme Court

159 U.S. 423

16 S.Ct. 94

40 L.Ed. 205

THORN WIRE HEDGE CO.

v WASHBURN & MOEN MANUF'G CO.

WASHBURN& MOEN MANUF'G CO.

v. THORN WIRE HEDGE CO.

Nos. 57 and 58.

November 11, 1895.

In the year 1875 the Washburn & Moen Manufacturing Company, a Massachusetts corporation, doing business at Worcester, Mass., was engaged extensively in the manufacture of wire. Having had its attention directed to barbed fence wire, an article then little known or used, the company determined to begin the making of it, conceiving that the future demand for such wire might serve to increase the output of its mill. There being no machine then in use for making barbed wire by steam power, the company contracted with H. W. Putnam, of Bennington, Vt., for the invention of one; and in the fall of 1875 such a machine was made in accordance with Putnam's plans, and a patent for it granted to him on February 15, 1876. The rights of Putnam in the invention were purchased by the company on September 28, 1875, the consideration being the sum of 25 cents per 100 pounds on all barbed fence wire that might thereafter be made by the company and its licensees, the company reserving the ritht, however, to cease the payment of such sums by paying at any time a sum of money which, added to the amounts previously paid, should equal $150,000.

The persons engaged in the barbed-wire business in the spring of 1876 were J. F. Glidden and I. L. Ellwood of De Kalb, Jacob Haish of De Kalb, H. B. Scutt of Joliet, and Charles Kennedy of Aurora, all of the state of Illinois; Doolittle & Co. (licensees of Kennedy) of Baridgeport, Conn.; and the Thorn Wire Hedge Company, a corporation organized under the laws of Illinois, and having its place of business at Chicago.

Various patents had been granted for barbed fence wire and machines for making the same, and of these J. F. Glidden, I. L. Ellwood, and Charles Kennedy owned the W. D. Hunt reissued patent No. 6,976, dated March 7, 1876, and the L. B. Smith reissued patent No. 7,137, dated May 23, 1876; J. F. Glidden and I. L. Ellwood owned the J. F. Glidden patent, No. 157,124, dated November 24, 1874, and the J. F. Glidden reissued patents, No. 6,913 (divsion A), dated February 8, 1876, and No. 6,914 (division B), dated February 8, 1876, being divisions of a reissue of an original patent, No. 150,683, dated May 12, 1874; Charles Kennedy owned the Charles Kennedy patents, No. 153,965, dated August 11, 1874, and No. 164,181, dated June 8, 1875. Jacob Haish owned, besides other patents the Jacob Haish patent, No. 167,240, dated August 31, 1875; and the Thorn Wire Hedge Company owned the Michael Kelly reissued patent, No. 6,902, dated February 8, 1876, and the Michael Kelly reissued patents, No. 7,035 (division A), dated April 4, 1876, and No. 7,036 (division B), dated April 4, 1876, being divisions of a reissue of an original patent, No. 84,062, for an improvement in 'metallic fences,' dated November 17, 1868. Of the machine patents, the Washburn & Moen Manufacturing Company owned the Putnam patent; J. F. Glidden and I. L. Ellwood owned the J. F. Glidden and P. W. Vaughan patent, No. 157,508, dated December 8, 1874; and the Thorn Wire Hedge Company owned the E. W. Mitchell patents, No. 172,760, dated January 25, 1876, and No. 173,491, dated February 15, 1876.

On May 10, 1876, the Washburn & Moen Manufacturing Company purchased the interest of J. F. Glidden in the said Hunt, Simith, and Glidden wire patents, and in the Glidden and Vaughan machine patent, paying him therefor the sum of $60,000, and agreeing to pay him, in addition, 25 cents per 100 pounds on all wire manufactured and sold under those patents after the date of the purchase; and on the 23d of the same month the company bought of Kennedy his own patents, and his interest in the Hunt and Smith patents, the consideration being the payment to him of 25 cents per 100 pounds on all wire that should thereafter be manufactured and sold under the patents in which the company, by this purchase, acquired his interest, until the aggregate of the amounts paid should equal $100,000.

At the same time that the Washburn & Moen Manufacturing Company purchased the interest of Glidden in the patents it purchased also his interest in the manufacturing business of Glidden & Ellwood, and a new partnership was formed for the purpose of making barbed fence wire at De Kalb, Ill., under the style of I. L. Ellwood & Co.; C. F. Washburn, as trustee of the company, becoming a partner with Ellwood.

On July 3, 1876, the company purchased of the Thorn Wire Hedge Company the said Kelly patents, agreeing to pay for them, as appears by a contract in writing executed by the com- panies on that date, in sum of 37 1/2 cents per 100 pounds upon all barbed fence wire which the Washburn & Moen Manufacturing Company should manufacture and sell and cause to be manufactured and sold under the said (Kelly) patents, or any one of them, and also upon all barbed fence wire which might be manufactured and sold by others under any license which might be granted by it under the said patents, or any one of them, for which pay should have been received by such licensees, for and during the term of the said patents. It was agreed, as further appears by the written contract, that the Washburn & Moen Manufacturing Company should keep separate and accurate accounts of the entire product manufactured and sold under the said patents, and of the part of the product for which they should actually receive pay in any form; that the Washburn & Moen Manufacturing Company should enter upon the manufacture of barbed fence wire under the said patents, and should use reasonable and diligent efforts 'to supply the demand for this article' throughout the country, and should also us proper and reasonable diligence in prosecuting infringers of the said patents, or any of them, to the end that the siad patents might be fully enforced and sustained; that the consideration received by the Thorn Wire Hedge Company for the said patents was to be the payment to them of the percentage upon sales as above specified, and that if at any time the Washburn & Moen Manufacturing Company should, for any reason whatever, discontinue permanently the manufacture of barbed fence wire under the said patents, then the said patents should be retransferred to the Thorn Wire Hedge Company within 90 days from the receipt of a written demand from it for such retransfer; that the Thorn Wire Hedge Company should assign all its interest in all claims for damages and profits for past infringements of the said several patents, and each of them; and that the Washburn & Moen Manufacturing Company might prosecute in the name of the Thorn Wire Hedge Company all suits that they might wish to institute against past infringers of the said several patents, or any of them. The agreement also contained. among other provisions, the following: 'Said Washburn and Moen Manufacturing Company, party of the second part, agrees that three-eighths of one cent per pound shall be paid on all the barbed fence wire which was made by Glidden and Ellwood and I. L. Ellwood & Company, from the dates of the several reissue patents aforesaid up to the date hereof; and also the same amount per pound upon all wire upon whch they shall recover from past infringers of said reissue patents, or either of them, under any suit or suits which they may hereafter institute and prosecute to final judgment, or which may be settled without judgment by payment of royalty by the defendants.'

At the same time—July 3, 1876—the Thorn Wire Hedge Company assigned the said Mitchell patents to the Washburn & Moen Manufacturing Company, and the latter granted to the former a license to use the Mitchell machines, under the Mitchell patent, at a single shop or factory in Chicago or elsewhere, and a license to manufacture and sell the forms of wire described in the Kelly patents at a single shop or factory in that city or elsewhere, after giving 30 days' notice of intention to remove.

The Washburn & Moen Manufacturing Company and I. L. Ellwood & Co. began the manufacture and sale of barbed fence wire in the spring of 1876. The rights which the company asserted under the patents acquired by it were not at once generally acquiesced in, and the making and selling of barbed fence wire was for a time carried on by a few persons without the company's authority. Licenses were granted on December 7 and 18, 1878, to the Ohio Steel Barb Fence Company, of Cleveland, Ohio, and to H. B. Scutt, doing business as H. B. Scutt & Co. (successor to the Joliet Wire Fence Company), of Joliet, Ill. In granting these licenses the company released all claims it might have against the licensees on account of damages for past infringement of its patents. The company granted no other licenses until January, 1881.

Some matters of dispute having arisen between the Thorn Wire Hedge Company and the Washburn & Moen Manufacturing Company as to the time in which payments were to be made on wire previously made by the firm of Glidden &amp Ellwood, and the suggestion having been made by the latter company that the former, in using the Mitchell machines, was infringing the Putnam patent, and it being thought for some reason that the 37 1/2 cents per 100 pounds provided for in the agreement of July 3, 1876, should be reduced, the companies, on December 2, 1878, executed another agreement, as an amendment and supplement to that of July 3, 1876. This contract made provisions adjusting the matters of difference between the companies, and reduced the amount required to be paid to the Thorn Wire Hedge Company to 25 cents per 100 pounds. A portion of the contract was as follows: 'The party of the first part [the Washburn & Moen Manufacturing Company] hereby covenants and agrees that it will make monthly reports of the amount of wire reported as sold by each of its licensees, said report to be on or before the 15th of each and every month, and to...