Webster Elec. Co. v. Podlesak

• Decision Date: 13 February 1919
• Docket Number: 553.
• Citation: 255 F. 907
• Parties: WEBSTER ELECTRIC CO. v. PODLESAK et al.
• Court: U.S. District Court — Northern District of Illinois

255 F. 907

WEBSTER ELECTRIC CO. v. PODLESAK et al.

No. 553.

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

February 13, 1919

Williams Bradbury & See and Jerome N. Frank, all of Chicago, Ill., and Livingston Gifford, of New York City, for plaintiff.

Charles C. Bulkley and Gann & Peaks, all of Chicago, Ill., and Sturtevant & Mason, of Washington, D.C., for defendants Sumter Electrical Co. and Splitdorf Electric Co.

Henry Joseph Podlesak, of Chicago, Ill., pro se.

William D. Thompson, of Racine, Wis., and William L. Hall, of Chicago, Ill., for defendant Tesla Emil Podlesak.

SANBORN District Judge.

Original and supplemental bills for patent in infringement and unfair competition. Suit was commenced October 12, 1915, and the supplemental one October 25, 1918. The patents involved are as follows:

No 13,878 (reissue), to Emil Podlesak, February 9, 1915.

No 1,055,076 (original), to Emil Podlesak, March 4, 1913.

No 947,647, to Henry J. and Emil Podlesak, January 25, 1910.

No. 948,483, to the same persons, February 8, 1910.

No. 1,003,649, to the same persons, September 19, 1911.

No. 1,022,642, to Henry J. Podlesak, April 9, 1912.

No. 1,056,360, to Henry J. and Tesla E. Podlesak, March 18, 1913.

No. 1,098,052, to Emil Podlesak, May 26, 1914.

No. 1,098,754, to Emil Podlesak, June 2, 1914.

No. 1,101,956, to Emil Podlesak, June 30, 1914.

The supplemental bill is for infringement of the patent to Edmund J. Kane, No. 1,280,105, September 24, 1918, application Feb. 2, 1910. These patents all relate to current generators for ignition applied to internal combustion hit and miss engines, and improvements.

The validity of the Podlesak patents was not a matter of controversy on the trial, by reason of the fact that the plaintiff and the corporate defendants are licensees or assignees of the Podlesak patents, and hence are estopped to question their validity. Thus the controversy involved the construction of the two license contracts, Exhibits C and D, explained later, as well as the validity of the Kane patent, brought in by supplemental bill. The contracts referred to, with two others, are in substance as follows:

By Exhibit A, license agreement of November 2, 1908, the Podlesaks give to plaintiff's predecessor the exclusive license to make, use, and sell within the United States, for the term of any patents which might be granted, applications No. 76,559, 413,068, 413,069, and 413,070, and covenanting that, while the license was in force, they would not grant, permit, or encourage others to make, use, or sell the inventions. It was agreed that the agreement should extend to and be binding upon the heirs, assigns, and legal representatives of the Podlesaks and the successors and assigns of the corporation. It is claimed by defendants that this agreement was revoked some time before February 5, 1914, when Exhibits C and D were made.

Exhibit B, August 17, 1912, is a contract between the Podlesaks, dividing their interests among themselves in the patents in question, and serial No. 618,483.

By license agreement, Exhibit C, February 5, 1914, the Podlesaks granted to plaintiff the exclusive right to make, use, and sell the inventions described as Nos. 947,647, 948,483, and 1,003,649 within the United States for the patent terms, covenanting that they would not, while the license was in force, make, use, or sell the inventions, or permit, grant, or encourage others to do so. The same provision as to assignment was also contained in this license.

By the shop-right agreement, Exhibit D, February 5, 1914, the Podlesaks made a contract with plaintiff, reciting that they were owners of patents Nos. 1,022,642, 1,055,076, and 1,056,360, and applications Nos. 734,143, 668,153, and 639,738 and that plaintiff desired to secure a shop right and license to make, use, and sell the inventions in the United States for the life of the patents, and that it was therefore agreed that the Podlesaks granted to plaintiff a shop right and license to make, use, and sell the inventions described in the patents and applications in the United States for the terms of the patents.

The corporation further agreed that it would use the devices made under this shop license only in connection with or for repairs to the devices mentioned in Exhibit C, and if made or sold not as a part of such devices the corporation would pay royalty, 5 per cent. of gross receipts. The licensors agree 'that they will not, while this license to the party of the second part is in force, give or grant shop licenses to make, use, or sell the herein said inventions, expressly reserving, however, the right to themselves to make, use, and sell the herein said inventions'; this agreement to be terminated upon the termination of Exhibit C.

The same clause as to assigns is contained in this paper as in Exhibit A. By clause 8 of Exhibit D it is provided that the plaintiff with the written approval of the Podlesaks, may grant shop licenses, to makers of or dealers in gas engines or gas engine accessories, embodying the inventions of patents 1,022,642 and 1,055,076 (the latter being for a bracket to mount the magneto upon the engine), on the same terms as to use only in connection with the inventions licensed in Exhibit C.

By the ninth paragraph it was provided that the plaintiff 'shall not permit or encourage other parties to manufacture, use, or sell devices covered by hereinbefore mentioned patents or patents that may be granted on herein said applications,' except as above provided as to licenses to engine builders or dealers.

In the second paragraph it is agreed that both parties should assist each other in procuring patents, and in any suit or proceeding brought under any of the patents or for their infringement; but the Podlesaks should not be required to bear any expense in any such suit, and they appointed the attorney for the plaintiff as their agent or attorney for the purpose of joining them as complainants in any such suit for infringement, without expense to the Podlesaks, who were to be exempt from liability for damages and costs in such suits, which were to be assumed by the plaintiff.

A further agreement, made January 20, 1915, Exhibit E, changes the royalty and contains the same agreement as to assigns. The Podlesaks having on September 4, 1915, assigned all these patents to the Sumter and Splitdorf Companies, and the contracts, Exhibits C and D, the construction of the license agreements becomes very important.

It should further appear that Emil Podlesak entered the employment of plaintiff's predecessor August 10, 1909, for the purpose of experimenting in magnetos, and if patents should be obtained on his inventions relating to the magneto then in use they were to be assigned to plaintiff's predecessor. In May 18, 1910, a second contract was made, providing that Podlesak should give his entire time to the development of magnetos for the use of which a royalty was to be paid; and by a third agreement, made March 3, 1913, reciting that Podlesak was employed by plaintiff, and that it desired to secure for its benefit and use such improvements in ignition apparatus as he might from time to time develop and that any patents obtained by him thereon should be assigned to plaintiff. This contract was to run until March 3, 1916. Podlesak ceased to be employed under this contract May 14, 1915. Under these contracts Emil Podlesak was successively an employe, superintendent, works manager, and secretary of plaintiff corporation. These employment contracts, so far as they relate to the ownership of patents, were superseded by Exhibits C and D above stated.

The meaning or construction of Exhibit C is entirely clear. The Podlesaks reserved no interest of any kind in any of the patents licensed and had nothing to assign to the Splitdorf Company, except the right to the royalties secured by the contract and the legal title to the patents. That is all the assignee took by the assignment. There is no controversy on this point. The second contract, Exhibit D, however, is not so plain.

A patent conveys to the patentee only a negative right of exclusion, not the natural original right to make, use, and sell the device covered by it. A licensee by the license obtains only immunity from an injunction suit brought against him by the patentee or owner. Paper Bag Case, 210 U.S. 405 28 Sup.Ct. 748, 52 L.Ed. 1122; Hartman v. John D. Park & Sons (C.C.) 145 F. 358; C. & A. Ry. Co. v. Pressed Steel Car Co., 243 F. 883, 156 C.C.A. 395 (Seventh Circuit). So by the first clause of the contract the plaintiff obtained immunity from suits by the Podlesaks against it, but left them free to grant licenses to others, except so far as the plaintiff was authorized to grant licenses to engine builders and dealers in engines or accessories, such as the Splitdorf Company. The right of exclusion of others, which is the right, dominion, or monopoly secured by the patents, was thus parceled out, divided or partitioned as follows: The Webster Company had the right to exclude every one but their engine builder or accessories dealer licensees and the Podlesaks. By the second paragraph the plaintiff might sue for infringement and control of the litigation, and by paragraph 8 grant licenses to a limited class, reserving royalties to itself. Excluding for the moment the later provisions of paragraph 1, quoted above, the patentees might grant licenses, except to the limited class referred to. But by paragraph 1 they covenanted that they would not exercise this right; 'that they would not give or grant shop licenses to make, use, or sell the herein said inventions, expressly reserving, however, the right to themselves to make, use, and sell the herein said inventions. ' Then by...