Washburn & Moen Mfg. Co. v. Cincinnati Barbed-Wire Fence Co.
| Decision Date | 20 June 1890 |
| Citation | 42 F. 675 |
| Parties | WASHBURN & MOEN MANUF'G CO. v. CINCINNATI BARBED WIRE FENCE CO. |
| Court | U.S. District Court — Southern District of Ohio |
Lehmann & Parks, for complainant.
James Moore, for defendant.
The bill sets forth that the complainant is the owner of certain patents relating to barbed wire, and machinery for making the same; that the defendant is its licensee, engaged in making and selling barbed wire under the license, which provides that the defendant shall make monthly reports of its manufacture and sales, and pay the stipulated royalty thereon; and that, for failure to comply with the provisions of the license, the complainant may declare a forfeiture. The bill further sets forth that many licenses have been granted by the complainant upon like terms with that of the defendant, all for the manufacture and sale of a limited quantity per annum of specified styles of wire; that for the proper maintenance of its business, and of the rights of the several licensees, monthly reports are necessary; that defendant promised, by its acceptance of the license, to co-operate with complainant in maintaining the license system; that it has failed to keep its agreement, and is engaged in making and selling barbed wire under the license without making monthly reports, or paying royalty. The prayer is that the defendant be decreed to perform its agreement that an account be had of the royalties due on its manufacture and sales; and that unless it complies with the requirements of its license, it be enjoined from further manufacture and sales thereunder. A general demurrer is interposed by the defendant; the point relied upon being that the complainant has an adequate remedy at law.
The defendant relies upon Washburn & Moen Manuf'g Co. v Freeman Wire Co., 41 F. 410; Root v. Railway Co., 105 U.S. 189; Purifier Co. v. Wolf, 28 F. 814; and Crandall v. Manufacturing Co., 24 F. 738. Washburn & Moen Manuf'g Co. v. Freeman Wire Co., was, in every particular, such a case as this, and the demurrer to the bill was sustained. In Purifier Co. v. Wolf, the license authorized the defendants to make and sell the patented article, and reserved the royalty, to be paid at the end of each month, upon the return of the number and kind of machines manufactured and sold. The court held that the payment of the royalty was a condition subsequent, and not precedent, and hence that the license was absolute, and, unless it contained some provision of forfeiture for non-payment, the failure to pay the royalty did not forfeit it, and that the licensor was left to his action for the royalty, and could not sustain a bill upon the patent as for an infringement. The court say, Justice BRADLEY pronouncing the opinion, that--
'A suit for royalty on a license is a suit at common law, or, if in equity, it is a suit on general equity, not depending at all upon the patent law, and not within the jurisdiction of the circuit court of the United States, unless the parties are citizens of different states.'
The court further said that, in view of the decision in Root v. Railroad Co., 105 U.S. 189, they were satisfied 'that the cause of action on the license is not within the equitable jurisdiction of the court; and therefore, if there had been a prayer in this bill for relief on the license for a recovery of the royalty, I don't think it could have been maintained. ' Counsel for the complainant undertakes to distinguish that case from this, but we are unable to see that it does not fully apply. In Crandall v. Manufacturing Co., it was held that the licensor had an adequate remedy at law, and could not maintain a bill in equity for an accounting of royalties accruing under the license. In that case it appears from the report that the only question was how much was due from the licensee under his contract, and no injunction was prayed for. The demurrer to the bill was sustained, but leave given to the complainant to amend. In Densmore v. Tanite Co., 32 F. 544, which was also cited by counsel for the defendant, the bill was brought to annul the license for the non-payment of the royalty. The court held that there could be no doubt that such a cause fell within the cognizance of equity, but that the failure to make returns of manufacture and sales, and pay the royalty, afforded no ground for annulling the license; and the demurrer was sustained, and the bill dismissed. Counsel for the complainant calls attention to the fact that the report of that case does not set out the provisions of the license, and suggests that it may be safely assumed that failure to report and to pay royalty was not a cause of forfeiture. Conceding the assumption, it avails the complainant nothing; for in no material respect does a cause upon a license containing no such clause of forfeiture differ from the present case, in which the forfeiture clause is waived, and therefore, so far as the distinction claimed is concerned, might as well have been omitted.
It is contended by counsel for the complainant that the license in the present case gives the licensee nothing more than a qualified right to manufacture and sell the patented article and that that right is dependent upon the payment of the royalties, and subject to forfeiture for non-payment. But this contention disregards the pregnant suggestion of Justice BRADLEY in Purifier Co. v. Wolf, already referred to, that, inasmuch as the payment of the royalty is a condition subsequent, and not a condition precedent, the license is absolute, subject only to the forfeiture clause. Such being the contract, the proposition in this case to waive the forfeiture, and substitute an injunction against manufacturing or selling under the license until payment of arrears of royalties, is, in effect, an appeal to a court of equity to coerce payment by making and enforcing a new contract for the parties, which ought not to be done. Refeld v. Woodfolk, 22 How. 318. In Woodworth v. Weed, 1 Blatchf. 165, cited for the complainant, the claim of forfeiture was not waived. It was held that the license was forfeited, and the licensee liable as an infringer, or to an action for the royalties, at the option of the licensor. In Wilson v. Sherman, Id., 536, it was held that there was a forbidden use of the patented thing; and as to that use, but not as to the use authorized by the license, a preliminary injunction was granted. In Magic Ruffle Co. v. Elm City Co., 13 Blatchf. 151, the license was to manufacture exclusively a specified ruffle, known as the 'double ruffle,' and to use the patented machines in its manufacture only. The bill alleged that after the license was made the defendants continued to make and sell the double ruffle specified, and...
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