Western Electric Co. v. Pacent Reproducer Corporation

• Decision Date: 05 May 1930
• Docket Number: No. 264.,264.
• Citation: 42 F.2d 116
• Parties: WESTERN ELECTRIC CO., Inc., et al. v. PACENT REPRODUCER CORPORATION et al.
• Court: U.S. Court of Appeals — Second Circuit

42 F.2d 116 (1930)

WESTERN ELECTRIC CO., Inc., et al. v. PACENT REPRODUCER CORPORATION et al.

No. 264.

Circuit Court of Appeals, Second Circuit.

May 5, 1930.

COPYRIGHT MATERIAL OMITTED

Charles Neave, of New York City (William R. Ballard, F. T. Woodward, and H. R. Ashton, all of New York City, of counsel), for appellants.

Kenyon & Kenyon, of New York City (Wm. Houston Kenyon, Theodore S. Kenyon, and W. Houston Kenyon, Jr., all of New York City, of counsel), for appellees.

Before MANTON, SWAN, and AUGUSTUS N. HAND, Circuit Judges.

SWAN, Circuit Judge (after stating the facts as above).

After dismissal of the previous appeal, reported in (C. C. A.) 37 F.(2d) 14, the District Court entered the final order of dismissal, which is now before us. The sole question presented is whether the two licensees should have been permitted to join as co-plaintiffs with the patent owner. The appellants rely upon Equity Rule 37 (28 US CA § 723, p. 20) and the acknowledged principle that an "exclusive licensee" is a proper party to join with the patent owner in an equity suit for infringement.

It is conceded that a bare license to practice a patented invention gives the licensee no right to join as plaintiff in a suit against an infringer. In its simplest form, a license means only leave to do a thing which the licensor would otherwise have a right to prevent. Such a license grants to the licensee merely a privilege that protects him from a claim of infringement by the owner of the patent monopoly. Heaton, etc., Co. v. Eureka Specialty Co. (C. C. A. 6) 77 F. 288, 290, 35 L. R. A. 728; De Forest, etc., Co. v. Radio Corp. (D. C. Del.) 9 F.(2d) 150, 151. He has no property interest in the monopoly of the patent, nor any contract with the patent owner that others shall not practice the invention. Hence the patent owner may freely license others, or may tolerate infringers, and in either case no right of the patent licensee is violated. Practice of the invention by others may indeed cause him pecuniary loss, but it does him no legal injury. Compare the analogous situation where the author of a copyrighted play grants a license to produce it, reserving moving picture rights, discussed in Tully v. Triangle Film Corp. (D. C. S. D. N. Y.) 229 F. 297, 298. Infringement of the patent can no more be a legal injury to a bare licensee than a trespass upon Blackacre could be an injury to one having a nonexclusive right of way across Blackacre. Therefore it is obvious that a bare licensee can neither sue alone, nor join with the patent owner, in an infringement suit. See Blair v. Lippincott Glass Co. (C. C. Ind.) 52 F. 226; Brookfield v. Novelty Glass Mfg. Co. (C. C. A. 1) 170 F. 960, 962; Heaton, etc., Co. v. Eureka Specialty Co., supra.

But a license to practice the invention may be accompanied by the patent owner's promise that others shall be excluded from practicing it within the field of use wherein the licensee is given leave. It is not disputed that an "exclusive licensee" has the right of joinder with the patent owner in an infringement suit. The dispute is as to the meaning of "exclusive licensee" within this rule. In Heap v. Hartley, 42 Ch. Div. 461, 470, Lord Justice Fry defined an exclusive license as "leave to do a thing, and a contract not to give leave to anybody else to do the same thing." A patent licensee having such a contract is obviously prejudiced by an infringement of the patent, for the patentee's sufferance of an unauthorized practice of an invention is as harmful to his promisee as would be the grant of a license in direct violation of the contract. To make effective such a contract, the licensee must have the right to compel the patentee to assert his monopoly for the benefit of his licensee; that is, the latter must have the right of joinder in a suit to restrain infringement, or of suing in the patentee's name if the patentee refuses to join in the litigation. In speaking of exclusive licenses in Independent Wireless Co. v. Radio Corp., 269 U. S. 459, at page 469, 46 S. Ct. 166, 170, 70 L. Ed. 357, Chief Justice Taft said:

"Such exclusive licenses frequently contain express covenants by the patent owner and licensor to sue infringers, that expressly cast upon the former the affirmative duty of initiating and bearing the expense of the litigation. But, without such express covenants, the implied obligation of the licensor to allow the use of his name is indispensable to the enjoyment by the licensee of the monopoly which by personal contract the licensor has given."

If the licensee is granted not only leave to make, use, and vend the invention, but also the right to exclude from the licensed field every one else, including the patent owner himself, the grant may amount to an assignment of an interest in the patent, entitling the licensee (assignee) to sue an infringer in his own name; if it is less inclusive, it remains a license. Waterman v. Mackenzie, 138 U. S. 252, 256, 11 S. Ct. 334, 34 L. Ed. 923. In that event, the licensee may restrain an infringement only by joinder with the patent owner, or by use of the latter's name if he refuses to join as plaintiff and cannot be made a party defendant. Waterman v. Mackenzie, supra; Paper-Bag Machine Cases, 105 U. S. 766, 26 L. Ed. 959; Birdsell v. Shaliol, 112 U. S. 485, 5 S. Ct. 244, 28 L. Ed. 768; Independent Wireless Tel. Co. v. Radio Corp., 269 U. S. 459, 46 S. Ct. 166, 70 L. Ed. 357.

The definition of an exclusive license, quoted above from the English case, might be thought to imply that an "exclusive licensee" is a sole licensee. But we do not so understand it. A bare license might be outstanding in one when the patent owner grants a license to another accompanied by the promise that the grantor will give no further licenses. In such a case, the second licensee needs the protection of the right of joinder in a suit against infringers as much as though he were the sole licensee. We see no reason why he should not have it, and we think the authorities recognize his right. See Radio Corp. v. Emerson (C. C. A. 2) 296 F. 51, where there were apparently outstanding nonexclusive license rights in the De Forest Company; Gayler v. Wilder, 10 How. 481, 13 L. Ed. 504, where the patentee retained the privilege of practicing the invention within the licensed territory, paying the licensee a royalty. Nor do the defendants challenge this view, if we correctly understand their...