Thorn Wire Hedge Co. v. Washburn and Moen Mfg. Co.Annotate this Case
159 U.S. 423 (1895)
U.S. Supreme Court
Thorn Wire Hedge Co. v. Washburn and Moen Mfg. Co., 159 U.S. 423 (1895)
Thorn Wire Hedge Company v. Washburn and Moen Manufacturing Company
Nos. 57, 58
Argued April 29-30, 1895
Decided November 11, 1895
159 U.S. 423
The parties to these suits having had extensive dealings founded upon mutual agreements and arrangements respecting the manufacture of and licenses to manufacture patented articles, and having had serious misunderstandings touching their accounts, came to an agreement whereby the Thorn Company, in consideration of the sum of $10,000 paid to it by the Washburn and Moen Company, released and discharged the latter from all claims and demands of every kind and nature whatsoever
which it had or could have against that company for and on account of any moneys, properties, or valuable things which the Washburn Company had received from any persons in settlement for damages or profits accruing to it on account of infringements committed upon any letters patent, and also on account of any moneys which it bad received by way of bonuses or premiums paid to it by parties receiving licenses from it, and discharged and released the Washburn Company from any obligation to account to the Thorn Company for any sums which it might thereafter receive in settlement of claims for damages for infringements prior to the date of that agreement, or for moneys which it should thereafter receive for bonuses or premiums for licenses. The parties worked under this agreement for several years, the Washburn Company paying and the Thorn Company receiving, without objection, from time to time considerable sums as royalties, etc., due thereunder, the Washburn Company settling with parties from whom the royalties were due, sometimes receiving cash in full, sometimes notes, and sometimes compromising on receipt of a lesser sum. After the lapse of about eight years, the Thorn Company filed its bill in equity to set aside the agreement and the settlements made under it, claiming that it was entitled to a much larger sum than it had received, and the Washburn Company, in its answer, denied this claim and filed a cross-bill claiming to recover from the Thorn Company large sums which it had been obliged to yield to licensees in compromising settlements with them.
(1) That the agreement released the Washburn Company from claims for damages due at its date but received subsequent thereto and from claims for royalties due on its own products or products of its licensees sold prior to its date;
(2) That under the circumstances disclosed, it was not open to the Thorn Company to claim that $10,000 was not a sufficient consideration for such release.
(3) That the Thorn Company, by receiving for so long a period royalties as accruing and receipting for them as collected without challenging the accounts rendered, and by its delay in setting up claims for moneys received by the Washburn Company before the date of the agreement, and its delay in contesting settlements and compromises made by that company, must be deemed to have acquiesced in the construction put upon the contract by the Washburn Company, and to have assented to its settlements with licensees, and that the evidence showed no want of diligence or good faith by the latter company in this respect.
(4) That the Washburn Company was not entitled to recover the sums claimed in its cross-bill.
In the year 1875, the Washburn and Moen Manufacturing Company, a Massachusetts corporation doing business at Worcester, Massachusetts, was engaged extensively in the
manufacture of wire. Having had its attention directed to barbed fence wire, an article then little known or used, the company determined to begin the making of it, conceiving that the future demand for such wire might serve to increase the output of its mill. There being no machine then in use for making barbed wire by steam power, the company contracted with H. W. Putnam, of Bennington, Vermont, for the invention of one, and in the fall of 1875 such a machine was made in accordance with Putnam's plans, and a patent for it granted to him on February 15, 1876. The rights of Putnam in the invention were purchased by the company on September 28, 1875, the consideration being the sum of 25 cents per 100 pounds on all barbed fence wire that might thereafter be made by the company and its licensees, the company reserving the right, however, to cease the payment of such sums by paying at any time a sum of money which, added to the amounts previously paid, should equal $150,000.
The persons engaged in the barbed wire business in the spring of 1876 were J. F. Glidden and I. L. Ellwood of De Kalb, Jacob Haish of De Kalb, H. B. Scutt of Joliet, and Charles Kennedy of Aurora, all of the State of Illinois; Doolittle and Co. (licensees of Kennedy) of Baridgeport, Connecticut, and the Thorn Wire Hedge Company, a corporation organized under the laws of Illinois and having its place of business at Chicago.
Various patents had been granted for barbed fence wire and machines for making the same, and of these J. F. Glidden, I. L. Ellwood, and Charles Kennedy owned the W. D. Hunt reissued patent No. 6,976, dated March 7, 1876, and the L. B. Smith reissued patent No. 7, 137, dated May 23, 1876; J. F. Glidden and I. L. Ellwood owned the J. F. Glidden patent, No. 157, 124, dated November 24, 1874, and the J. F. Glidden reissued patents, No. 6,913 (division A), dated February 8, 1876, and No. 6,914 (division B), dated February 8, 1876, being divisions of a reissue of an original patent, No. 150,683, dated May 12, 1874; Charles Kennedy owned the Charles Kennedy patents, No. 153,965, dated August 11, 1874, and No. 164, 181, dated June 8, 1875. Jacob Haish owned, besides other patents,
the Jacob Haish patent, No. 167,240, dated August 31, 1875, and the Thorn Wire Hedge Company owned the Michael Kelly reissued patent, No. 6,902, dated February 8, 1876, and the Michael Kelly reissued patents, No. 7,035 (division A), dated April 4, 1876, and No. 7,036 (division B), dated April 4, 1876, being divisions of a reissue of an original patent, No. 84,062, for an improvement in "metallic fences," dated November 17, 1868. Of the machine patents, the Washburn and Moen Manufacturing Company owned the Putnam patent; J. F. Glidden and I. L. Ellwood owned the J. F. Glidden and P. W. Vaughan patent, No. 157,508, dated December 8, 1874, and the Thorn Wire Hedge Company owned the E. W. Mitchell patents, No. 172,760, dated January 25, 1876, and No. 173,491, dated February 15, 1876.
On May 10, 1876, the Washburn and Moen Manufacturing Company purchased the interest of J. F. Glidden in the said Hunt, Smith, and Glidden wire patents and in the Glidden and Vaughan machine patent, paying him therefor the sum of $60,000 and agreeing to pay him, in addition, 25 cents per 100 pounds on all wire manufactured and sold under those patents after the date of the purchase, and on the 23d of the same month the company bought of Kennedy his own patents, and his interest in the Hunt and Smith patents, the consideration being the payment to him of 25 cents per 100 pounds on all wire that should thereafter be manufactured and sold under the patents in which the company, by this purchase, acquired his interest, until the aggregate of the amounts paid should equal $100,000.
At the same time that the Washburn and Moen Manufacturing Company purchased the interest of Glidden in the patents, it purchased also his interest in the manufacturing business of Glidden and Ellwood, and a new partnership was formed for the purpose of making barbed fence wire at De Kalb, Illinois, under the style of I. L. Ellwood and Co.; C. F. Washburn, as trustee of the company, becoming a partner with Ellwood.
On July 3, 1876, the company purchased of the Thorn Wire Hedge Company the said Kelly patents, agreeing to pay for them, as appears by a contract in writing executed by the companies
on that date, in sum of 37 1/2 cents per 100 pounds upon all barbed fence wire which the Washburn and Moen Manufacturing Company should manufacture and sell and cause to be manufactured and sold under the said (Kelly) patents, or any one of them, and also upon all barbed fence wire which might be manufactured and sold by others under any license which might be granted by it under the said patents, or any one of them, for which pay should have been received by such licensees, for and during the term of the said patents. It was agreed, as further appears by the written contract, that the Washburn and Moen Manufacturing Company should keep separate and accurate accounts of the entire product manufactured and sold under the said patents and of the part of the product for which they should actually receive pay in any form; that the Washburn and Moen Manufacturing Company should enter upon the manufacture of barbed fence wire under the said patents, and should use reasonable and diligent efforts "to supply the demand for this article" throughout the country, and should also use proper and reasonable diligence in prosecuting infringers of the said patents, or any of them, to the end that the said patents might be fully enforced and sustained; that the consideration received by the Thorn Wire Hedge Company for the said patents was to be the payment to them of the percentage upon sales as above specified, and that if at any time the Washburn and Moen Manufacturing Company should, for any reason whatever, discontinue permanently the manufacture of barbed fence wire under the said patents, then the said patents should be retransferred to the Thorn Wire Hedge Company within ninety days from the receipt of a written demand from it for such retransfer; that the Thorn Wire Hedge Company should assign all its interest in all claims for damages and profits for past infringements of the said several patents, and each of them, and that the Washburn and Moen Manufacturing Company might prosecute in the name of the Thorn Wire Hedge Company all suits that they might wish to institute against past infringers of the said several patents, or any of them. The agreement also contained, among other provisions, the following:
"Said Washburn and Moen
Manufacturing Company, party of the second part, agrees that three-eighths of one cent per pound shall be paid on all the barbed fence wire which was made by Glidden and Ellwood and I. L. Ellwood and Company, from the dates of the several reissue patents aforesaid up to the date hereof, and also the same amount per pound upon all wire upon which they shall recover from past infringers of said reissue patents, or either of them, under any suit or suits which they may hereafter institute and prosecute to final judgment or which may be settled without judgment by payment of royalty by the defendants."
At the same time -- July 3, 1876 -- the Thorn Wire Hedge Company assigned the said Mitchell patents to the Washburn and Moen Manufacturing Company, and the latter granted to the former a license to use the Mitchell machines, under the Mitchell patent at a single shop or factory in Chicago or elsewhere, and a license to manufacture and sell the forms of wire described in the Kelly patents at a single shop or factory in that city or elsewhere, after giving 30 days' notice of intention to remove.
The Washburn and Moen Manufacturing Company and I. L. Ellwood and Co. began the manufacture and sale of barbed fence wire in the spring of 1876. The rights which the company asserted under the patents acquired by it were not at once generally acquiesced in, and the making and selling of barbed fence wire was for a time carried on by a few persons without the company's authority. Licenses were granted on December 7 and 18, 1878, to the Ohio Steel Barb Fence Company, of Cleveland, Ohio, and to H. B. Scutt, doing business as H. B. Scutt and Co. (successor to the Joliet Wire Fence Company), of Joliet, Illinois. In granting these licenses, the company released all claims it might have against the licensees on account of damages for past infringement of its patents. The company granted no other licenses until January, 1881.
Some matters of dispute having arisen between the Thorn Wire Hedge Company and the Washburn and Moen Manufacturing Company as to the time in which payments were to be made on wire previously made by the firm of Glidden and
Ellwood, and the suggestion having been made by the latter company that the former, in using the Mitchell machines, was infringing the Putnam patent, and it being thought for some reason that the 37 1/2 cents per 100 pounds provided for in the agreement of July 3, 1876, should be reduced, the companies, on December 2, 1878, executed another agreement, as an amendment and supplement to that of July 3, 1876. This contract made provisions adjusting the matters of difference between the companies and reduced the amount required to be paid to the Thorn Wire Hedge Company to 25 cents per 100 pounds. A portion of the contract was as follows:
"The party of the first part [the Washburn and Moen Manufacturing Company] hereby covenants and agrees that it will make monthly reports of the amount of wire reported as sold by each of its licensees, said report to be on or before the 15th of each and every month, and to embrace the report of the sales of the licensees made during the previous month, or any month not previously reported, and that it will pay over to the party of the second part or its legal representatives the money that it collects of said licensees, that is to be paid to the party of the second part hereto quarterly -- that is to say, on or before the last day of each January, April, July, and October, it will pay the party of the second part such proportion of the money that it has received from its licensees during the previous quarter, as royalties, as one-fourth of a cent per pound is to the entire amount per pound which said licensees agree to pay as royalty. And the said party of the second part hereby agrees to waive and does hereby relinquish any and all claim on the said first party for royalties on barbed wire made by its licensees which it may so fail to collect after using due diligence and lawful means to collect the same, but in that case, the party of the first part shall make a report to the party of the second part of all such royalties as it shall fail to collect, and from whom due, and the cause of such failure to collect, and the first party agrees to make each of its licensees agree to pay it for the second party one-quarter of a cent a pound on all the barbed wire it makes and sells during the term of the Kelly patents, and to use its best endeavors to
collect the same."
The agreement also provided:
"And the party of the second part also releases all right and claim it may have on the party of the first part and the parties hereinafter named on account of the infringement of any of the Kelly patents, so called, which it formerly owned, by the Ohio Steel Barb Fence Company, Jacob Haish, the Joliet Wire Fence Company and H. B. Scutt, and James Ayres and Alexander C. Decker and their customers on account of selling their respective barbed wires, provided, however, the party of the first part makes a settlement with them, or either of them, whereby it condones or waives the past royalties or damages in the settlement of the suits which it, or it and I. L. Ellwood, now have pending against them, or either of them, then and in that case the party of the second part releases as aforesaid as to the party so settled with."
About the time such reduction was made in the amount required to be paid to the Thorn Wire Hedge Company, reduction was also made by another of the assignors, thus reducing the aggregate of the amounts to be paid by the Washburn and Moen Manufacturing Company to the assignors of the patents to 87 1/2 cents per 100 pounds.
As already shown, the Washburn and Moen Manufacturing Company, a short time after the execution of the agreement, granted licenses to the Ohio Steel Barb Fence Company and H. B. Scutt and Co. Other persons engaged in making barbed wire refused, however, to become licensees and pay royalty, and in January, 1879, they formed an association for the purpose of resisting the efforts which, by litigation and other means, were being made by the company to stop infringement by them of the patents, and to induce them to take licenses. The Ohio Steel Barb Fence Company reported sales of wire under its license for the months of March, April, and May, 1879, but refused to pay royalties after April 30, 1879. H. B. Scutt and Co. continued to manufacture under their license, and paid royalty at the rate of 137 1/2 cents per 100 pounds.
On August 7, 1879, the Washburn and Moen Manufacturing Company and the Thorn Wire Hedge Company executed a third agreement, supplemental to the contracts of July 3,
1876, and December 2, 1878, a part of which was as follows:
"That for the purpose of increasing the manufacture and sale of the barbed fence wire mentioned in said agreements and license and inducing other parties to pay royalties thereon, it is mutually agreed by the parties hereto that the party of the second part [the Thorn Wire Hedge Company] will reduce the amount to be paid to it per pound by the party of the first part on all barbed fence wire hereafter manufactured or caused to be manufactured and sold by it, as provided by the said contracts of July 3, 1876, and December 2, 1878, to 15 cents per 100 pounds, and it is understood and agreed that all the provisions and agreements hereinbefore referred to, relating to the price per pound in said agreements agreed to be paid by the party of the first part to the party of the second part, shall apply to the price per pound to be paid as reduced by this supplemental agreement, and the said party of the first part agrees to reduce the royalty or amount required to be paid to it on account of its ownership of any patents used in the manufacture of said wire by it or its licensees, or persons manufacturing or selling barbed fence wire under its authority, or who shall hereafter be so licensed by it, to at least seventy-five cents per hundred pounds of said barbed fence wire so manufactured and sold."
Reductions were also made by other assignors, so that after August 7, 1879, the aggregate of the amounts required to be paid by the Washburn and Moen Manufacturing Company on account of the various patents was 68 3/4 cents per 100 pounds.
On August 10, 1879, the company reduced the royalty payable to it by H. B. Scutt and Co. to 81 1/4 cents on general sales and 56 1/4 cents on Texas sales, and on August 1, 1880, a further reduction was made to 50 cents on all sales of that firm.
The company and I. L. Ellwood continued the prosecution of suits against alleged infringers of the patents, and in 1880 about fourteen of these suits were pending in the Circuit Court of the United States for the Northern District of Illinois, and were being contested by the association of unlicensed manufacturers. A final decision was reached in the cases on December
15, 1880, by which the Kelly reissued patent No. 6,902 and the Hunt and Glidden patents were held valid, and subsequently decrees were entered referring the causes to a master to ascertain and report the amounts of damages. The Kelly reissued patent No. 7,035, insofar as it may have been relied upon to affect the cases, was held invalid. It did not appear to the court that any of the defendants had infringed the Smith patent, and therefore the question of its validity was not passed upon. Washburn and Moen Manufacturing Co. v. Haish, 4 F. 900, 7 F. 906. After this decision was announced, a large number of manufacturers recognized the rights asserted by the company under the patents, and applied to if for license. C. F. Washburn, vice-President of the company, and I. L. Ellwood, met the applicants in the City of Chicago, and in January and February, 1881, granted more than forty licenses. Each of the persons licensed paid to the company either damages for past infringement, estimated at 60 cents per 100 pounds on all wire that the licensee had theretofore made, or a bonus of from five to ten dollars for each ton of wire authorized to be made in any one year thereafter, and in most instances both damages and bonus were exacted. The company also required all the licensees except two to assign to it whatever patents they owned.
The licenses were printed, and were all of the same form, with the exception of the date, name of licensee, and amount of tonnage authorized, and each license provided for the payment of royalty at the rate of three-fourths of a cent per pound. The printed form contained this provision:
"And the royalty to be paid under this license shall not be greater than that charged to any other party licensed after the ___ day of December, A.D. 1880, under the said several letters patent, or any of them, hereinbefore mentioned by date and number, by said Washburn and Moen Manufacturing Company; that is, if said Washburn and Moen Manufacturing Company shall hereafter conclude to and does license any other party or parties during the continuance of this license to manufacture and sell barbed fence wire in the United States and territories, and this license is confined to the United States and territories, under
said letters patent, or any of them, hereinbefore mentioned by date and number at a less sum per pound than ___ of a cent, then and thereafter the royalty to be paid by said _____ to said Washburn and Moen Manufacturing Company under this license shall be the same as such reduced royalty."
When the licenses were granted, in January and February, 1881, the Thorn Wire Hedge Company requested Mr. C. F. Washburn to furnish it a statement of the amount of the said back damages and bonuses. The statement not being furnished, the Thorn Wire Hedge Company wrote to the Washburn and Moen Manufacturing Company on March 21, 1881, saying:
"We have not yet received report of sales for month of February, nor official notice of settlements with the various infringing companies, all of which should be due by the 15th of this month."
On the 28th of the same month, the Washburn and Moen Manufacturing Company answered:
"With reference to official notice of settlements with the various infringing companies, etc., we shall defer making our report on that subject until we have had an opportunity of seeing Mr. Ellwood here in Worcester, which will happen early in the month of April."
On April 25, 1881, the Washburn and Moen Manufacturing Company wrote again, to the effect that it was under no obligation to pay the Thorn Wire Hedge Company any part of the damages recovered or received in settlement for past infringement of the patents, or any part of the bonus money. The Thorn Wire Hedge Company answered this letter on May 16, 1881, and submitted an opinion of its counsel, asserting its right to a share in the back damages.
More correspondence followed, but no adjustment of these differences between the companies was made until one was effected by an agreement in writing dated July 27, 1881. About that time, there was also made what is called in the testimony and argument the "Haish settlement," which it is necessary here to explain.
Jacob Haish was one of the persons against whom the above-mentioned decision was rendered at the suit of the Washburn and Moen Manufacturing Company on December
15, 1880. An interlocutory decree had previously been entered requiring Haish to pay into court an amount equal to 75 cents per 100 pounds on all wire made by him after such decree, and up to the entry of the final decree against him, he had paid into court the sum of $25,000. After the decision of December 15, 1880, Haish, instead of following the course which was adopted by all the other defendants and making settlement with the company, refused to become its licensee and continued his opposition to its patents. This placed the company, as it believed, in a very unfavorable position. Haish was the owner of patents which the company feared might be used by him to disturb its licensees, and for various reasons his persistent opposition was regarded by the company as harmful to its interests. Vigorous efforts were therefore made to effect a settlement with him, and these resulted in a statement by him on June 29, 1881, of the terms upon which a settlement would be consented to. The terms proposed by him were: (1) a release from all claims for back damages; (2) each party to pay his own costs in court; (3) a license to him from the company to manufacture 10,000 tons of barbed wire a year, he to pay royalty at the rate of 75 cents per 100 pounds; (4) he to assign to the company all his patents, and to receive from it an exclusive license under the same; (5) the company to pay him for the patents $10,000 cash and 75 cents per 100 pounds on all barbed wire made by himself up to the quantity of 4,000 tons per year, and the further amount of 25 cents per 100 pounds on the next 4,000 tons made by him in the same year.
Under date of July 26, 1881, the Washburn and Moen Manufacturing Company and Haish executed an agreement in writing which recited that the company had theretofore granted divers licenses under several patents for barbed wire fencing and for machinery; that Haish claimed that some of the licensees were infringing patents owned by him; that for the better protection of the licensees, it had become necessary for the company to acquire, by purchase from Haish, all his patents relating to barbed fencing or machinery; that Haish, by an instrument of even date, had assigned all his patents to
the company, and transferred to it all claims for damages for the infringement of the same, and had released the company and its licensees from all claims for damages for infringement of the patents, and that Haish had accepted from the company a license to manufacture 10,000 tons of barbed fence wire annually under the patents, and agreed to pay royalty at the rate of 75 cents per 100 pounds. The agreement then provided in substance that the company or its licensees should manufacture 8,000 tons of barbed fence wire every year until February 27, 1894, and should pay to Haish until that time 75 cents per 100 pounds on the wire so manufactured, not exceeding 4,000 tons each year, and a further sum of 25 cents per 100 pounds on any excess over that quantity each year up to but not exceeding 4,000 tons; that the company should not, however, pay any part of such sum to Haish unless he should first have paid or tendered to the company, as royalty under the license accepted by him, a sum equal to the amount which he should demand from the company.
On the same day, Haish assigned his patents to the company and Ellwood, and released the company and its licensees and Ellwood from all damages for past infringement of the same, and receive from the company the license mentioned in the recitals of the above agreement, and exclusive licenses to make barbed fence wire and to use machinery under the patents assigned by him to the company without paying royalty. He also received from the company and Ellwood a release of all claims for damages for infringement of their patents, and the company paid him the sum of $10,000 in cash, and agreed that he might withdraw the money which he had paid into court, and that decrees might be entered in the suits against him for nominal damages without costs.
Under date of July 27, 1881, the Thorn Wire Hedge Company executed the following instrument:
"In consideration of the sum of one dollar and other valuable considerations to it paid, the Thorn Wire Hedge Company, a corporation duly organized under the laws of the State of Illinois, and located at the City of Chicago, in said state, does authorize the Washburn and Moen Manufacturing Company and Isaac L. Ellwood
to make settlement with Jacob Haish, of De Kalb, Illinois, for his past infringements of the letters patent for barbed fence wire and machinery for making the same, owned by the Washburn and Moen Manufacturing Company, or by said company and Isaac L. Ellwood, and to grant to the said Haish a license to manufacture and sell annually ten thousand tons of barbed fence wire under said patents, as provided in a proposed agreement between the Washburn and Moen Manufacturing Company and the said Jacob Haish, and assented to by Isaac L. Ellwood (copies of which proposed agreement and license being hereto attached), and does release the said Washburn and Moen Manufacturing Company from all its agreements with the said Thorn Wire Hedge Company, dated respectively July 3, 1876, December 2, 1878, and August 7, 1879, to account for any proportion of the moneys received from the said Jacob Haish, whether, in settlement of past infringements or for royalties hereafter paid under the said license, which may be required to be expended or remitted in the settlement with said Jacob Haish, or in payment of the consideration money for the transfer and conveyance of all the patent rights to letters patent and inventions which are or shall be conveyed by the said Haish to the said Washburn and Moen Manufacturing Company and Isaac L. Ellwood, as provided in said proposed agreement."
On the same day that the settlement with Haish was consummated, the companies, as already stated, reached an agreement with regard to the back damages and bonuses. This agreement was expressed in an instrument of writing bearing date July 27, 1881, a portion of which was as follows:
"Whereas there are certain agreements in writing subsisting between the parties above named, bearing date, respectively, July 3, 1876, December 2, 1878, and August 7, 1879, to which reference may be had for all matters therein contained, and whereas the Thorn Wire Hedge Company claims that under the effects of said agreements it is entitled to a share of the damages or moneys or other valuable things which the Washburn and Moen Manufacturing Company have received from the different persons, firms, or corporations who have infringed
upon the patents owned by the said Washburn and Moen Manufacturing Company and I. L. Ellwood, and have accepted licenses from them to manufacture barbed fence wire under the several patents owned and controlled by them, and also claims that it is entitled to share in certain bonuses or premiums which have been paid by various licensees for the privilege of obtaining a license, and for other causes makes other claims for damages or compensation on various grounds against said Washburn and Moen Manufacturing Company:"
"Now therefore in consideration of the premises and of the sum of ten thousand dollars to it paid, the said the Thorn Wire Hedge Company does by these presents hereby release and discharge the said Washburn and Moen Manufacturing Company from all claims or demands of every kind and nature whatsoever which it has or can have against said company for and on account of any moneys, properties, or valuable things which the said Washburn and Moen Manufacturing Company has received from any persons in settlement for damages or profits accruing to it or to it and I. L. Ellwood on account of infringements committed upon any letters patent for barbed fence wire or machinery for making the same, and also for and on account of any moneys which it has received by way of bonuses or premiums paid to it by parties receiving licenses from it and from I. L. Ellwood to manufacture barbed fence wire, and does also discharge and release the said Washburn and Moen Manufacturing Company from any obligation to account to the Thorn Wire Hedge Company for any sums of money or valuable things which it shall or may hereafter receive or acquire from any parties in settlement of suits or claims for damages for the infringements prior to the date of this agreement, of letters patent owned by the said Washburn and Moen Manufacturing Company, or by it and I. L. Ellwood, or for moneys which it shall hereafter receive for bonuses or premiums paid for licenses."
"Furthermore, in the execution of the existing agreements between the parties bearing date July 3, 1876, December 2, 1878, and August 7, 1879, before referred to, providing for
the payment of fifteen cents by the Washburn and Moen Manufacturing Company to the Thorn Wire Hedge Company, as consideration money for the Kelly patents, upon everyone hundred pounds of barbed fence wire manufactured and sold by it, or its licenses, or by its authority, the said the Thorn Wire Hedge Company does release and surrender any claim against the Washburn and Moen Manufacturing Company for any share in or proportion of the license fees or royalties which it shall receive from Jacob Haish, under the agreement between the Washburn and Moen Manufacturing Company and the said Jacob Haish (a copy of which has been furnished to the Thorn Wire Hedge Company), which shall be required under said agreement to be applied by the Washburn and Moen Manufacturing Company or used in the payment of any consideration for the purchase from said Haish of certain patent properties, and the release of claims for infringements against licensees under said agreement."
As heretofore stated, most of the manufacturers of barbed fence wire throughout the country applied to the Washburn and Moen Manufacturing Company in January and February, 1881, and obtained licenses. Subsequently, however, some persons in Iowa and Missouri began manufacturing without license, and the company thereupon brought suits against them for infringement of the patents which had been held valid in the Northern District of Illinois. The Circuit Court of the United States for the Eastern District of Missouri, in which some of these cases were heard, decided adversely to the company on June 4, 1883, holding that the Kelly and Glidden reissued patents were void. Washburn and Moen Manufacturing Co. v. Fuchs, 16 F. 661. This decision, although its direct effect was confined, of course, to the states composing the Eighth Circuit, tended greatly to weaken the company's control over the barbed wire business, and, in order to maintain its position as a receiver of royalties, it became necessary for it to reduce the royalties required to be paid by its licensees to 30 cents per 100 pounds. The more important of the Kelly patents having been held valid in the Seventh Circuit, the company was not disposed to exercise its
option, provided for in its contract with the Thorn Wire Hedge Company of July 3, 1876, of discontinuing its manufacture under those patents and reassigning them to the last-named company, but entered into an agreement in writing with that company, dated June 12, 1883, by which the Thorn Wire Hedge Company agreed to reduce the amounts to be paid to it to five cents per 100 pounds, and to shorten the time for which the payments should continue to be made from November 17, 1885, to February 12, 1885. Among the provisions of this agreement were the following:
"Seventh. Said Washburn and Moen Manufacturing Company agree to pay said reduced royalty of five cents on each and everyone hundred pounds of barbed fence wire which it shall license to be made, or which shall be sold under a license from it, on and after June 1, 1883, to and including February 11, 1885. Payments of said reduced royalty of five cents for each one hundred pounds on licensed wire to be made in accordance with the said original agreement and the amendment thereof, but no payments or royalty on licensed wire to be made until it shall have been first collected by said Washburn and Moen Manufacturing Company."
"Eighth. Said party of the second part [the Washburn and Moen Manufacturing Company] further covenants and agrees with the party of the first part, its successors or assigns, that it will pay the said reduced royalty of five cents per one hundred pounds to the party of the first part, its successors or assigns, on the barbed wire made and sold by itself, I. L. Ellwood and Co., or its licensees at the time, in the manner, and on the same terms and conditions as payments are now required to be made by the provisions of the agreements now existing between the parties hereto, and that such payments, when due and payable, shall be promptly and punctually made to said party of the first part, or its successors or assigns, without any delay or rebate on account of any claim or demand, or question of claim or demand, of said party of the second part, or said I. L. Ellwood and Co., against said party of the first part, and independently of any and all questions of dispute or otherwise which may arise between said party of
the first part and said party of the second part, or said I. L. Ellwood and Co., or any or either of them."
After February 12, 1885, the Thorn Wire Hedge Company made certain demands upon the Washburn and Moen Manufacturing Company, asserting that that company had failed in various ways to perform its obligations under the several contracts. The justice of these demands having been denied, the Thorn Wire Hedge Company, on June 6, 1887, filed its bill in equity in the Superior Court of Cook County, Illinois, against the Washburn and Moen Manufacturing Company, setting up the grounds of its complaint and praying for discovery and an accounting. Upon petition of the defendant, the cause was removed on June 21, 1887, into the Circuit Court of the United States for the Northern District of Illinois, where the defendant company filed its answer on July 2, 1887. After the greater part of the testimony had been taken, the complainant, on June 19, 1889, filed an amended bill, and the defendant, on the 21st of the same month, filed an amended answer and a cross-bill. The complainant filed its answer to the cross-bill on June 29, 1889. The taking of testimony was resumed and completed and, the cause having been heard in the said circuit court upon the pleadings and evidence, a final decree was entered on November 29, 1889, dismissing both the bill and the cross-bill for want of equity. Thereupon both parties appealed to this Court.
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