Victor Talking Mach. Co. v. The Fair

• Decision Date: 14 April 1903
• Docket Number: 946.
• Citation: 123 F. 424
• Parties: VICTOR TALKING MACH. CO. et al. v. THE FAIR.
• Court: U.S. Court of Appeals — Seventh Circuit

123 F. 424

VICTOR TALKING MACH. CO. et al. v. THE FAIR.

No. 946.

United States Court of Appeals, Seventh Circuit.

April 14, 1903

Horace Pettit, for appellants.

Walter Chamberlin, for appellee.

Appeal from the Circuit Court of the United States for the Northern Division of the Northern District of Illinois.

Appellants' bill alleges that they own all legal and equitable rights under letters patent No. 534,543, issued February 19, 1895 on the application of Emile Berlinger, and that appellee without license sold, and after notice to desist threatens to continue to sell, devices that embody the invention described and claimed in the patent. After other averments usual in the ordinary bill for infringement appears a prayer for decree for a preliminary and a perpetual injunction and an accounting of profits and damages. In the body of the bill however, it is disclosed that appellants made the gramophones in question; affixed to each a notice of these words 'Notice. This machine, which is registered on our books No. . . ., is licensed by us for sale and use only when sold to the public at a price not less than $ . . . . No license is granted to use this machine when sold at a less price. And sale or use of this machine when sold in violation of this condition will be considered as an infringement of our United States patents under which this machine and records used in connection therewith are constructed, and all parties so selling or using this machine contrary to the terms of this license will be treated as infringers of said patents, and will render themselves liable to suit and damages. This license is good only so long as this label and the above-noted registered number remain upon the machine, and erasures, or removal of this label, will be construed as a violation of the license. A purchase is an acceptance of these conditions. All rights revert to the undersigned in the event of any violation. Victor Talking Machine Co.;' filled in the blanks on each notice with the appropriate number and the price, $25; and sold them to a jobber subject to all the restrictions set forth in the notice, which restrictions the jobber accepted and agreed to at the time of the purchase. It is also averred that appellee, proprietor of a department store in Chicago, having at the time full knowledge of the restrictions under which the jobber took the machines, purchased and acquired possession of them, with the labels conspicuously attached thereto, from the jobber; advertised them for sale at $18 each; and sold some and insisted upon its right to sell the others at the cut price.

Appellee demurred and for causes assigned that the bill showed (1) that appellee had the right to sell the machines at any price it chose, and (2) that appellant's cause of action, if any, arose through the violation of a contract, and not through the infringement of a patent. The court sustained the demurrer, and upon appellants' refusal to plead further the decree was rendered from which this appeal is taken.

Before JENKINS, GROSSCUP, and BAKER, Circuit Judges.

BAKER Circuit Judge (after stating the facts as above).

1. Concerning jurisdiction: When a contract is made respecting a right under a patent, and the parties get into litigation, confusion has sometimes arise over the question whether the cause of action originates in the contract of in the patent laws. The test is this: If the plaintiff is seeking a judgment for debt or damages, or a decree for cancellation or specific performance, on account of the defendant's breach of his covenants, the cause of action arises out of the contract; and, though the determination of the issue of breach or no breach may involve the interpretation of the patent and of the prior art, the insistence of the defendant that his device, according to the true construction of the patent and of the prior art, is not within the patent right granted him in the contract, cannot change the nature of the action. Standard Sewing Machine Co. v. Leslie, 118 F. 557, 55 C.C.A. 323. On the other hand, if the plaintiff is seeking a judgment for damages, or a decree for an injunction and an accounting, on account of the defendant's unauthorized use of the patent right in making or using or selling the device without license, the cause of action arises out of the patent laws; and, though the determination of the issue of infringement or no infringement may involve the interpretation of the contract, the insistence of the defendant that his act was within his rights under the contract, if properly construed, cannot change the nature of the action. We think the rule as stated is clearly deducible from the authorities. Mr. Chief Justice Taney's statement of the nature of the bill in Wilson v. Sanford, 10 How. 99, 13 L.Ed. 344, points out the class to which that action belongs:

'The object of the bill is to have this contract set aside and declared to be forfeited; and the prayer is 'that the appellant's re-investiture of title to the license granted to the appellees, by reason

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