United States Fire Escape Counterbalance Co. v. Joseph Halsted Co.

• Court: U.S. District Court — Northern District of Illinois
• Citation: United States Fire Escape Counterbalance Co. v. Joseph Halsted Co., 195 F. 295 (N.D. Ill. 1912)
• Decision Date: 16 April 1912
• Docket Number: 30,586,30,587.
• Parties: UNITED STATES FIRE ESCAPE COUNTERBALANCE CO. v. JOSEPH HALSTED CO.

195 F. 295

UNITED STATES FIRE ESCAPE COUNTERBALANCE CO. v. JOSEPH HALSTED CO.

Nos. 30,586, 30,587.

United States District Court, N.D. Illinois, Eastern Division.

April 16, 1912

Brown &amp Hopkins, of Chicago, Ill., for complainant.

Hill &amp Hill, of Chicago, Ill., for defendant.

SANBORN District Judge.

Exceptions to amendment to answer. An order sustaining exceptions to a part of the original answer having been made, defendant was allowed to amend, and did so, March 15, 1912. Exceptions being made to the amendment and heard defendant offered a substitute amendment, and made a motion for leave to file April 10, 1912. This motion was granted, the exceptions to the amendment to stand as exceptions to the substitute. The only question is whether the assignment of a patent in aid of a combination made unlawful by the Sherman Act operates to pass title, or is to be treated as absolutely void for all purposes and in all places. May an infringer, one who unlawfully takes the property of another, defend himself on the ground that the property so taken or despoiled became vested in his adversary by an unlawful act? Is the latter to be excluded from the courts because he is himself a lawbreaker, or is his own wrongdoing to be redressed only through the remedies peculiarly applicable?

It is urged that the amendment to the answer shows that the assignment of the patent sued on was made as part of an illegal scheme to monopolize the business of dealing in fire escapes, and that defendant, though alleged to be an infringer, may therefore attack the patent transfer. Stated briefly, the substituted amendment sets out the following: Complainant does not make, use, or sell the patented devices, but is an illegal corporation in the nature of a trust to fix prices or limit output, being merely a holding company. Complainant was organized to acquire patents, and gain control of nonpatented devices, for the purpose of suppressing competition and regulating prices of fire escapes. This it does through licensees, who were engaged in making and installing fire escapes prior to complainant's organization. The business of these licensees is substantially the same as before, except that they now pay license fees to complainant. Each licensee makes a different form of fire escape. Prior to joining the combination some of the licensees had patents and others had not. The latter class had been making fire escapes not within the patent sued on, without molestation or payment of royalty, and they are still making the same styles as before, but paying license fees to complainant. The licenses were made without consideration except immunity to the licensees from competition and unjust prosecution, and the opportunity of joining others in suppressing competition and raising prices. Prior to complainant's organization, the fire escapes, both patented and nonpatented, were in competition which is now suppressed. It is alleged, as a conclusion from the facts thus stated, that complainant is an unlawful combination under the Sherman Act (Act July 2, 1890, c. 647, 26 Stat. 209 (U.S. Comp. St. 1901, p. 3200)), all its acts and contracts in furtherance of the scheme are void--

'and that any and all title to property of any nature acquired by or under any such contract or agreement in furtherance and in aid of such illegal acts, is also absolutely void and of no effect; that the alleged assignment of the patent herein sued on to the complainant was in furtherance of and in aid of accomplishing said illegal combination; that said assignment and this suit against this defendant, and suits against others similarly situated, are each steps in one and the same fraudulent and illegal scheme, the one being dependent upon the other for its success, to control the prices of fire escapes, to suppress competition, and to compel this defendant and other manufacturers of fire escapes who are not in said combination, to yield to the demands of the complainant to that effect, or to drive them out of the business of manufacturing and selling fire escapes, to the manifest injury of the public and contrary to public policy under the law; that said assignment is, therefore, illegal, void and of no force and effect to transfer title of said patent to the complainant herein; and that the complainant therefore has no title in the patent sued on, and no title or right of any kind sufficient to found this suit upon.'

By the great weight of federal authority, the infringer of a patent cannot justify his acts by attacking complainant as a trust or unlawful combination. This is simply saying, 'You're another.' Complainant may be an obnoxious combination, but that does not excuse defendant for appropriating its property. Such a doctrine would justify stealing stolen goods from the thief, or despoiling any real or supposed trust of all its holdings. Strait v. National Harrow Co. (C.C.) 51 F. 819; Edison El. Lt. Co. v. Sawyer-Man El. Co., 53 F. 592, 3 C.C.A. 605; Otis Elevator Co. v. Geiger (C.C.) 107 F. 131. In Connolly v. Union Sewer Pipe Co., 184 U.S. 540, 22 Sup.Ct. 431, 46 L.Ed. 679, Connolly bought pipe and gave notes for it, upon which the suit was brought, alleging that he ought not to pay the notes because the pipe company was an unlawful trust, and that the sale for which the notes were given was made in the ordinary business of the trust. He also claimed treble damages under the Sherman Act. The court say:

'The defense cannot be maintained. Assuming, as defendants contend, that the alleged combination was illegal if tested by the principles of the common law, still it would not follow that they could, at common law, refuse to pay for pipe bought by them under special contracts with the plaintiff. The illegality of such combination did not prevent the plaintiff corporation from selling pipe that it obtained from its constituent companies or either of them. It could pass a title by a sale to any one desiring to buy, and the buyer could not justify a refusal to pay for what he had bought and received by proving that the seller had previously, in the prosecution of its business, entered into an illegal combination with others in reference generally to the sale of Akron pipe.'

The Connolly Case was an action at law, while this is in equity and it is urged that a court of equity will not lend its aid to an illegal trust even to the extent of protecting its property rights. In other words, that an unlawful combination may be freely...