Woods v. Carl

• Decision Date: 06 May 1905
• Citation: 87 S.W. 621,75 Ark. 328
• Parties: WOODS v. CARL
• Court: Arkansas Supreme Court

87 S.W. 621

75 Ark. 328

WOODS v. CARL

Supreme Court of Arkansas

May 6, 1905

Appeal from Pulaski Circuit Court, Second Division, EDWARD W WINFIELD, Judge.

Affirmed.

STATEMENT BY THE COURT.

Appellants sued appellee to recover upon a negotiable promissory note executed by the latter to the Human Gas Company, and which said payee, for a valuable consideration, assigned to appellants before maturity. Appellee, for defense, alleged that "the consideration of the note sued on herein was the sale to him by the said Human Gas Company of a certain patented machine, * * * and the right to the patent thereof in Arkansas, and the said note, not being executed in the form required by law, is absolutely void."

The facts are undisputed. The Human Gas Company, a partnership composed of C. G. Human, Chas. Heberer, and J. W. Hansell were the owners of the right to manufacture and sell in the State of Arkansas, and other States, a patented machine known as the Human Automatic Acetylene Gas Generator used for the purpose of generating gas; and in consideration of the note sued on, and the payment of the sum of $ 200, executed to appellee a written contract reciting that they "have sold, and by these presents do sell, to Frank Carl of Little Rock, Ark. , party of the second part, an individed one-half interest in our business to be known as the Human Gas Company of Arkansas for the sale and manufacture of the Human Automatic Acetylene Gas Generator in the said State of Arkansas."

The court instructed the jury as follows: "If you find that this note was given for a patent right machine, or territory you will find for defendant; if not, you will find for plaintiffs." To which instruction plaintiffs excepted.

The jury returned a verdict for the defendant, and the plaintiffs appealed.

Affirmed.

Mechem & Mechem, for appellants.

The court erred in refusing to direct a verdict for the plaintiffs, and in submitting the case as coming within section 513 of Kirby's Digest. 67 Ark. 575; 70 Ark. 200; 97 U.S. 501; 36 Oh. St. 370; 39 Oh. St. 236; 86 Pa.St. 173; 70 Ill. 110; 37 Mich. 309; 3 Lea, 22; 14 Neb. 134; 23 Minn. 24; 2 Biss. 309; 2 Flip. 33; 25 F. 394; 51 F. 774; 118 U.S. 356; 120 U.S. 68; 183 U.S. 79; 184 U.S. 540; 127 F. 206.

Ratcliffe & Fletcher, for appellee.

The evidence showed that the note was given for a patent or patent right. 17 Wall. 543; 67 Ark. 575. Our statute is not in conflict with the power of Congress. 60 Ark. 114; 70 Ark. 200; 41 L. R. A. 548; 107 Tenn. 499; 108 Ind. 307; 109 N.Y. 127; 102 Ind. 528; 116 Ind. 118; 105 Ind. 250; 41 S.W. 447; 86 Pa. 173; 75 P. 110; 103 U.S. 344; 97 U.S. 511; 36 Oh. St. 370. Our statute is not in conflict with the Fourteenth Amendment. 170 U.S. 293; 173 U.S. 404; 174 U.S. 96; 185 U.S. 308; 194 U.S. 267; 103 U.S. 344.

OPINION

MCCULLOCH, J., (after stating the facts.)

The note sued on does not conform to the provisions of the act of April 23, 1891 (Kirby's Dig. §§ 513-516), in that it does not show upon its face that it was executed in consideration of the sale of a patented article or patent right.

The statute in question is as follows:

"Sec. 513. Any vendor of any patented machine, implement, substance, or instrument of any kind or character whatsoever, when the said vendor of the same effects the sale of the same to any citizen of this State on a credit, and takes any character of negotiable instrument in payment of the same, the said negotiable instrument shall be executed on a printed form, and show upon its face that it was executed in consideration of a patented machine, implement, substance or instrument, as the case may be, and no person shall be considered an innocent holder of the same, though he may have given value for the same before maturity, and the maker thereof may make defense to the collection of the same in the hands of any holder of said negotiable instrument; and all such notes not showing on their face for what they were given shall be absolutely void.

"Sec. 514. The foregoing section shall also apply to vendors of patent rights and family rights to use any patented thing of any character whatever.

"Sec. 515. Any vendor of any patented thing of any character, or any vendor of any patent right or family right to use any patented thing of any character whatsoever who shall violate the provisions of section 513 shall upon conviction be punished by a fine of not more than three hundred dollars.

"Sec. 516. This act shall not apply to merchants and dealers who sell patented things in the usual course of business."

Appellants contend, in the first place, that the contract in evidence shows neither a sale of a patented article nor a patent right, but we think it is quite clear that the contract must be construed as a sale of a patent right. It in express terms conveys to appellee an undivided one-half interest in the business of manufacturing and selling a patented machine in the State of Arkansas for an unlimited time, and provides that "in the event the net earnings of the Human Gas Company have not been sufficient to cover the amount of the said Frank Carl's investment by January 1, 1902, then the Human Gas Company hereby agree and bind ourselves to relinquish all of our right, title and interest in and to the said State of Arkansas, * * * and give said Frank Carl a good deed and manufacturer's right in and to the said State of Arkansas for the sale and manufacture of the Human Automatic Acetylene Gas Generator." A conveyance of an interest in the right to sell a patented article in a given territory is as much a sale of a "patent right" as a conveyance of the entire right to sell in the territory. No distinction can be made between the transactions in this regard. New v. Walker, 108 Ind. 365, 9 N.E. 386; Pinney v. First Nat. Bank (Kan.), 68 Kan. 223, 75 P. 119.

It is urged by appellants that this statute is in conflict with § 8, art. 1, of the Constitution of the United States, giving to the Congress of the United States the power "to promote the progress of science and useful arts by securing, for limited times, to authors and inventors the exclusive right to their respective writings and discoveries."

In the case of Tilson v. Gatling, 60 Ark. 114, 29 S.W. 35, this court had under consideration the act of April 9, 1891 (Kirby's Digest, § 512), changing the rules of the law merchant concerning commercial and negotiable paper, so as to permit the payee or drawee of such paper executed in payment of a patent right, or patent right territory, to make all defenses against the assignee or holder of such paper that he could have made against the original payee or drawee, whether such paper be assigned before maturity or not; and that statute was held not to invade the power of Congress to create patent rights, etc. It is difficult to perceive any distinction between the validity of the two statutes in that regard; for if the Legislature had the rightful power to pass one of the statutes, it had also power to pass the other. If the jurisdiction of Congress over the subject of patents and patent rights is so extensive as to exclude the power of a State to declare void, unless made in certain form, written obligations given in consideration of sales of patent rights, or patented articles, then it also follows that the State is powerless to alter the established rules of the law merchant so as to permit defenses, not applicable to other negotiable paper, to be made to such paper given in consideration of sales of patent rights or patented articles. The argument of learned counsel for appellants that such legislation is an improper "discrimination against patented articles by imposing upon their sale conditions and restrictions not placed upon the sale of other similar articles" is as cogent against one of the statutes on the subject as against the other.

In Wyatt v. Wallace, 67 Ark. 575, 55 S.W 1105, the precise question was presented there as presented here, and the court held that there could be no recovery upon the note sued on. We are asked by counsel to review the question, inasmuch as in the last-named case the alleged conflict between the statute and the constitutional power of Congress on the subject was not discussed, either in the argument of counsel or the opinion of the court. This question was before the Supreme Court of Tennessee in a recent case, State v. Cook, 107 Tenn. 499, 64 S.W. 720, and that court held that a statute similar to our own was valid, and not in conflict with the Constitution of the United States. The reasoning of the court, in the very lucid opinion by Judge Caldwell, where all the authorities are carefully reviewed, is, to our minds, conclusive of the proposition that such legislation by the States is not in conflict with the Federal Constitution. In Tennessee, as in Arkansas, the Legislature first enacted a statute permitting the same defenses against negotiable paper in the hands of any holder or assignee as while in the hands of the original payee; and later another statute was passed declaring it to be unlawful to accept a note given for the sale of a patent right unless it shall appear upon the face of the note that the same is given in the purchase of a patent right. The learned judge, in the case cited, said: "The two statutes are to be construed together as different parts of the same legislative scheme. Their combined effect, when each is strictly observed and enforced, is simply to prevent written obligations for the purchase of patents or interests therein from being negotiable in the highest sense, and to subject them in whatsoever hands to all defenses available to the maker against the original payee. So construed, neither act by itself, nor the two combined into a single scheme, can be truly said to...