1. A suit is within the jurisdiction of the district court, as
arising under the patent laws, where the bill seeks an injunction
against infringement, with profits and damages, even though it
contain averments in denial of an anticipated defense of license or
authority
Page 270 U. S. 497
to use the patent.
Hartell v. Tilghman, 99 U. S.
547, qualified. P.
270 U. S.
510.
2. But where the main purpose of the bill is to recover
royalties under a license or assignment, or damages for breach of
covenants, or for specific performance thereof, or to declare a
forfeiture of licenses or obtain a reconveyance of an assigned
patent for breach of conditions, additional averments of danger
that the patent will be infringed after the title has been so
restored, coupled with a prayer for an injunction, do not bring the
case within the federal jurisdiction.
Wilson v.
Sandford, 10 How. 99. Pp.
270 U. S. 502,
270 U. S.
510.
Affirmed.
Appeal from a decree of the district court dismissing the bill
for want of jurisdiction in a suit by Luckett, a patent owner, for
an accounting and damages under license agreements, for
cancellation of the agreements, injunction against future
infringement of the patents, etc.
Page 270 U. S. 498
MR. CHIEF JUSTICE TAFT delivered the opinion of the Court.
Philip A. Luckett is a citizen of Connecticut. He brought this
bill in equity in the District Court of the United States for the
District of New Jersey against Delpark,
Page 270 U. S. 499
a corporation of New York, and against Parker, Ford & Dick,
a corporation, formerly known as the Luckett Company, organized in
the state of Maryland. Appearing for the purpose of the motion
only, the defendants filed a motion to dismiss because the court
was without jurisdiction to entertain the bill. The certificate by
the district court shows its dismissal on that ground September 17,
1924. This appeal was allowed November 24, 1924, so that it is
maintainable under § 238 of the Judicial Code in accordance with
the saving provision of § 14 of the Act of February 13, 1925, 43
Stat. 942.
Section 51 of the Judicial Code provides that, where the
jurisdiction is founded on the fact that the action is between
citizens of different states, suits shall be brought only in the
district of the residence of either the plaintiff or the defendant.
The requisite diverse citizenship between the plaintiff and the
defendants exists in this suit, but the District of New Jersey is
not the district of the residence of either the plaintiff or the
defendants, and, against defendants' objection jurisdiction on that
ground, cannot be sustained.
The plaintiff asserts that jurisdiction exists as of a suit
under the patent laws under Judicial Code, § 24, par. 7, § 48, and
§ 256. Section 48 provides that,
"in suits brought for the infringement of letters patent, the
district courts of the United States shall have jurisdiction, in
law or in equity, in the district of which the defendant is an
inhabitant, or in any district in which the defendant, whether a
person, partnership, or corporation, shall have committed acts of
infringement and have a regular and established place of
business."
The question in this case, then, is whether, it being averred
that the defendants regularly do business in New Jersey, and have
made and sold there the patented articles referred to in the bill,
its allegations make the suit one arising under the patent
laws.
Page 270 U. S. 500
The bill shows that two patents were issued to Luckett, one on
November 12, 1918, No. 1,284,391, and the other on October 12,
1915, No. 1,156,301, for a method of making undergarments known as
union suits. The later patent, No. 1,284,391, is averred to be the
generic and the broader invention, while the earlier patent, No. 1,
156,301, is a specific and narrower one. After the later patent was
applied for, before it was granted, Luckett gave a nonexclusive
license for manufacture and sale of the garments under it to the
Delpark corporation. This reserved to Luckett a royalty on all
garments manufactured and sold under it, the licensee covenanting
to give access to its books of account. A supplementary agreement
made the license exclusive. Later Luckett gave to the other
defendant, Parker, Ford & Dick, and assignment of the letters
patent No. 1,156,301, under which a particular union suit, known as
the "My Pal" suit, is made, with conditions subsequent that the
assignee should pay certain royalties, should keep the accounts
open for inspection, and should push vigorously the sale of "My
Pal" suits, and with a provision that, if any condition subsequent
failed, the title to the letters patent assigned should revert to
Luckett, on his giving the assignee 30 days' notice in writing of
his election to resume title. All the contracts of license and
assignment made by the plaintiff with each of the defendants are
attached to the bill as exhibits.
The averments of the bill are that Delpark, Incorporated, has
acquired control of the stock of the Parker, Ford & Dick
corporation, and the defendants are acting together; that the
Delpark corporation refuses to pay to Luckett any royalties due
under its exclusive license of the generic patent; that the Parker,
Ford & Dick corporation refuses to pay any royalties under
plaintiff's assignment to it of the specific patent, and refuses to
push the sale of "My Pal" suits; that this refusal is to prevent
competition of the "My Pal" suits with the Delpark suits,
Page 270 U. S. 501
and thus deprives plaintiff of royalties on the "My Pal" suits.
The plaintiff avers that, on November 27, 1918, by notice in
writing, he cancelled his assignment to the Parker, Ford & Dick
corporation, for failure of condition subsequent, and resumed his
title to letters patent No. 1,156,301.
The seventeenth paragraph in the bill, and the only one which
uses the word "infringement," is as follows:
"(XVII) And your orator further shows unto your honors that
Delpark, Incorporated, is a large concern with substantial capital,
and ever since the issue of letters patent No. 1,284,391 on
November 12, 1918, has been actively engaged in the manufacture and
sale of the Delpark garment, so called, which infringes the claims
of the said letters patent, and also the claims of letters patent
No. 1,156,301, and that large numbers of the said garment have been
made and sold upon which royalties are now due to your orator, the
amount of which he is wholly unable to state with definiteness, but
which is far larger than $3,000, exclusive of interest and costs,
and that, though often requested as hereinbefore set out, no
accounting has ever been had between your orator and Delpark,
Incorporated, or Parker, Ford & Dick, Inc., either as to
royalties due or as to damages for failure to observe the contract
to exploit the 'My Pal' garment."
The plaintiff sets out 13 prayers for equitable relief. He asks
that the defendants file statements of the garments made and sold
under both patents, containing retail prices at which the garments
were sold, in order to show the royalties due; also a statement of
the orders received for the "My Pal" garments, but not filled, with
prices, to show the royalties lost, and that they be compelled to
permit access to their books of account. He further prays that the
Parker, Ford & Dick corporation be required to execute a formal
reassignment of letters
Page 270 U. S. 502
patent No. 1,156,301 to the complainant, so as to remove the
cloud from his title to that patent, and that an order issue
cancelling the licenses and agreements made with both defendants.
He prays for damages for suppressing the "My Pal" garment, and the
failure properly to exploit it as agreed.
In prayer J, the plaintiff asks that a preliminary injunction
issue against both defendants to prevent their making sale or
delivery of the so-called Delpark garment, or the so-called "My
Pal" garment, or any other garment infringing the claims of the two
letters patent of the plaintiff, until further order of court. By
prayer K, a similar permanent injunction is asked. There is a
prayer for an order sending the cause to a master to take and state
the account of profits and damages, both as to royalties due and
accrued, and as to damages for suppression of the "My Pal" garment,
and to report the same to the court.
We do not think that this suit arises under the patent laws. Its
main and declared purpose is to enforce the rights of the plaintiff
under his contracts with defendants for royalties and for pushing
the sales of "My Pal" garments. In addition, he seeks the
reconveyance of one patent on forfeiture for failure of condition
to remove a cloud on his title and a cancellation of all agreements
of license of the other for their breach in order presumably that,
unembarrassed by his assignment and licenses, he may enjoin future
infringement.
It is a general rule that a suit by a patentee for royalties
under a license or assignment granted by him, or for any remedy in
respect of a contract permitting use of the patent, is not a suit
under the patent laws of the United States, and cannot be
maintained in a federal court as such.
Wilson v.
Sandford, 10 How. 99;
Brown v.
Shannon, 20 How. 55;
Hartell v. Tilghman,
99 U. S. 547;
Albright v. Texas, 106 U. S. 613;
Dale Tile
Manufacturing
Page 270 U. S. 503
Co. v. Hyatt, 125 U. S. 46;
Marsh v. Nichols, Shepard & Co., 140 U.
S. 344;
Briggs v. United Shoe Machinery Co.,
239 U. S. 48.
In
Wilson v. Sandford, supra, a bill in equity was
filed in a federal Circuit Court setting forth complainant's
ownership of a patent, an assignment to defendants of a license in
consideration of five promissory notes, with a condition of
reversion to complainant on failure to pay any note. The bill
averred that the first two notes were not paid, insisted that the
license was forfeited by the failure and the licensor was fully
reinvested at law and in equity with all his original rights, that
the defendants were using the patented machine and were infringing
the patent, prayed an account of profits since forfeiture, a
temporary and permanent injunction, and a reinvestiture of title in
the complainant. On demurrer, the bill was dismissed for lack of
jurisdiction as not arising under the patent laws. Chief Justice
Taney, speaking for the Court, said:
"The rights of the parties depend altogether upon common law and
equity principles. The object of the bill is to have this contract
set aside and declared to be forfeited, and the prayer is 'that the
appellant's reinvestiture of title to the license granted to the
appellees, by reason of the forfeiture of the contract may be
sanctioned by the court,' and for an injunction. But the injunction
he asks for is in consequence of the decree of the court
sanctioning the forfeiture. He alleges no ground for an injunction
unless the contract is set aside, and if the case made in the bill
was a fit one for relief in equity, it is very clear that whether
the contract ought to be declared forfeited or not, in a court of
chancery, depended altogether upon the rules and principles of
equity, and in no degree whatever upon any act of Congress
concerning patent rights."
The bill in the present case cannot in any respect be
distinguished from that in
Wilson v. Sandford, as this
Page 270 U. S. 504
language of the opinion shows. But counsel for the appellant
here insists that a new and more liberal rule has been adopted by
this Court in later cases, and that the time has now come for
recognizing it by taking what he calls the last step.
In the common feature of
Wilson v. Sandford and the
case before us, jurisdiction falls because the complainant in his
bill seeks forfeiture of licensed rights in equity before he can
rely on the patent laws to enjoin infringement of his patent rights
and obtain damages therefor. There has been no variation from the
authority and effect of the case cited on this point.
New
Marshall Co. v. Marshall Engine Co., 223 U.
S. 473,
223 U. S. 480;
White v. Lee, 3 F. 222;
Adams v. Meyrose, 7 F.
208;
Standard Dental Mfg. Co. v. National Tooth Co., 95 F.
291;
Atherton Machine Co. v. Atwood-Morrison Co., 102 F.
949, 955, approved in
Excelsior Wooden Pipe Co. v. Pacific
Bridge Co., infra, at
185 U. S. 294;
Victor Talking Machine Co. v. The
Fair, 123 F. 424, 425;
Comptograph Co. v. Burroughs Adding
Machine Co., 175 F. 787;
American Graphophone Co. v.
Victor Talking Machine Co., 188 F. 431;
Lowry v.
Hert, 290 F. 876.
The cases cited as qualifying
Wilson v. Sandford are White
v. Rankin, 144 U. S. 628;
Excelsior Wooden Pipe Co. v. Pacific Bridge Co.,
185 U. S. 282;
Henry v. Dick Co., 224 U. S. 1;
The
Fair v. Kohler Die Co., 228 U. S. 22;
Healy v. Sea Gull Specialty Co., 237 U.
S. 479, and
Geneva Furniture Co. v. Karpen,
238 U. S. 254. We
think that none of these cases shakes the authority of
Wilson
v. Sandford upon the point here in question, or can be used to
sustain the present bill. The case which has been "blown upon" is
that of
Hartell v. Tilghman, supra, in which the opinion
of the court was delivered by Mr. Justice Miller, speaking for
himself and three other justices, and in which Mr. Justice
Bradley
Page 270 U. S. 505
announced a dissenting opinion in which two others concurred.
That case was a suit in equity in which the complainant set up a
process patent and complained that defendants were infringing by
using the process without license and prayed an injunction and a
decree for profits and damages. The bill further averred that
negotiations had been had between the parties looking to a license,
beginning with a verbal agreement by complainant that he should put
up machinery for use of defendants in their shop in using the
patent, and that thereafter defendants should take a license on
certain well understood conditions, that complainant under the
verbal agreement put up the machinery and was paid for it and
received royalties under it for use of the patent for some months,
that, on tender of contract forms for the license defendants
refused to sign, and that, on such refusal complainant forbade
defendants to use the process and brought the suit. The majority
relied on
Wilson v. Sandford, and held that the suit was
not under patent laws; that complainant could not himself rescind
the verbal contract, treat it as a nullity and charge the
defendants as infringers, but must preliminarily seek rescission in
a court of equity. Mr. Justice Bradley's view was that the
plaintiff in his bill had chosen to place himself on the
infringement of his patent as his sole ground, and that, by
anticipation of the defense and his answer to it in his bill, as
allowed by equity pleading he did not change its nature.
In
White v. Rankin, supra, it was held that a bill in
equity for the infringement of letters patent for an invention in
the usual form, which did not mention or refer to any contract with
the defendants for the use of the patent, could not be dismissed
for lack of jurisdiction, because the defendants in a plea set up
an agreement in writing between the plaintiffs and one of the
defendants to assign to him an interest in the patent on certain
conditions which he alleged he had performed, and certain other
Page 270 U. S. 506
matters which it was alleged had given the defendant the right
to make, use and sell the patented invention. The plea being
overruled and the answer filed, a stipulation in writing was
entered into, admitting that the defendants had made and sold the
articles containing the patented inventions, and that a certain
written agreement had been made to the purport before mentioned.
The decision of the Court was that the jurisdiction was established
by the averments of the bill, and that the defense constituted a
mere issue as to the title to the patent, but could not oust the
jurisdiction which rested on the averments of the bill.
In
Excelsior Wooden Pipe Co. v. Pacific Bridge Co.,
supra, an exclusive licensee filed a bill against the patentee
and another party to whom the patentee had granted a conflicting
license. This Court held that the patent jurisdiction of the court
was not ousted by reason of allegations in the answer that the
plaintiff had forfeited all his rights under the license through
his failure to comply with its terms and conditions, by reason of
which the license had been revoked by the patentee. Complainant was
an exclusive licensee which sought damages for infringement of its
license and the patent against the patentee and one to whom he had
granted a subsequent and conflicting license. In such a case, the
licensee had the right to sue the patentee on the patent.
Littlefield v.
Perry, 21 Wall. 205;
Independent Wireless
Telegraph Co. v. Radio Corporation of America, 269 U.
S. 459. The case was held to be a suit for infringement
under the patent laws, jurisdiction in which was not ousted because
the patentee had led a third person to infringe the patent and the
first license.
In
Henry v. Dick Co., supra, the patentee for a kind of
ink filed a bill for infringement against the users of his patent
whom the bill showed to be using the ink in connection with
unpatented supplies not made by the
Page 270 U. S. 507
patentee in violation of a license from the patentee limited to
its use with its supplies. The case has been since reversed on the
merits,
Motion Picture Co. v. Universal Film Co.,
243 U. S. 502, but
not on the point of jurisdiction. It was objected that the suit was
not a suit under the patent laws, but a suit on the license
contract. It was held that the patentee might waive the contract
and sue on the tort of infringement, that jurisdiction must depend
on the remedy it chose and sought in its bill, and that, as the
patentee had neither sued on the broken contract of license nor
asked to have it forfeited by the court, the jurisdiction under the
patent laws was not ousted.
In
The Fair v. Kohler Die & Specialty Co., supra,
the Kohler Company brought a bill in equity to enjoin The Fair from
making and vending certain devices and selling them at less than
$1.50 each, and asked an account and triple damages. The bill
alleged that plaintiff had the sole and exclusive right to make and
sell devices and that the defendant had full notice thereof and was
selling the same without license from the plaintiff. It alleged
that the plaintiff, when it sold, imposed the condition that the
good should not be sold at less than $1.50, and attached to the
goods a notice to that effect, and that any sale in violation of
that condition would be an infringement. It further averred that
the defendant obtained a stock of the devices with notice of the
conditions, and sold them at $1.25 each, in infringement of the
plaintiff's right under the patent. The defendant pleaded specially
that he had purchased these devices from a jobber, who had paid
full price to the plaintiff, and that there was no question arising
under the patent or other laws of the United States, and that the
court had no jurisdiction of the case. The case came on for hearing
on the plea. This Court held that, on the bill, the plaintiff made
a case under the patent laws, in that it set up the patent,
charged
Page 270 U. S. 508
infringement, and sought triple damages, and that, in showing
later in the bill that the infringement consisted in a sale at a
less price than that which it had authorized in an admitted
license, it did not oust the court of jurisdiction, because it
might appear upon further hearing of the cause on its merits that
the restriction of the license upon which the claim of infringement
was based was not valid.
In
Healy v. Sea Gull Specialty Co., supra, the bill
alleged ownership of the exclusive right to make and use boxmaking
machines and sell boxes containing the patented improvements. It
further alleged that the defendant was infringing the patents, and
would continue to do so unless restrained. Anticipating a defense,
the plaintiff set out a license to the defendant, a breach of its
conditions, and a termination of the same. It added that the
license contained a stipulation that, in case of any suit for
infringement, the measure of recovery should be the same as the
royalty agreed upon for the use of the inventions, and another for
the return of the machines let to the defendant while the license
was in force. The bill prayed for an injunction against making,
using, or selling the boxes or machines, for an account of profits
received by reason of the infringement, for triple the damages
measured as above stated, and for the surrender of the machines. In
sustaining the jurisdiction as arising under the patent laws, the
court used these words:
"It may be that the reasoning of
The Fair v. Kohler Die
& Specialty Co., 228 U. S. 22, is more consistent
with that of Mr. Justice Bradley's dissent in
Hartell v.
Tilghman, 99 U. S. 547,
99 U. S.
556 (a decision since explained and limited,
White
v. Rankin, 144 U. S. 628) than with that of
the majority, but it is the deliberate judgment of the court, and
governs this case. As stated there, the plaintiff is absolute
master of what jurisdiction he will appeal to, and if he goes to
the district court for
Page 270 U. S. 509
infringement of a patent, unless the claim is frivolous or a
pretense, the district court will have jurisdiction on that ground
even though the course of the subsequent pleadings reveals other
more serious disputes.
Excelsior Wooden Pipe Co. v. Pacific
Bridge Co., 185 U. S. 282. Jurisdiction
generally depends upon the case made and relief demanded by the
plaintiff, and as it cannot be helped, so it cannot be defeated, by
the replication to an actual or anticipated defense contained in
what used to be the charging part of the bill. For the same reason,
it does not matter whether the validity of the patent is admitted
or denied."
"As appears from the statement of it, the plaintiffs' case arose
under the patent law. It was not affected by the fact that the
plaintiffs relied upon a contract as fixing the mode of estimating
damages, or that they sought a return of patented machines to
which, if there was no license, they were entitled. These were
incidents. The essential features were the allegation of an
infringement and prayers for an injunction, an account of profits,
and triple damages -- the characteristic forms of relief granted by
the patent law. The damages were grounded on the infringement, and
the contract was relied upon only as furnishing the mode in which
they should be ascertained."
In
Geneva Furniture Co. v. Karpen, supra, the patentee
charged the defendants in his bill in equity with contributing to
the infringement by wrongfully persuading the licensees of the
complainant to use the patent in circumstances not authorized by
the license; second, with wrongfully procuring such licensees to
violate their licenses in particulars not bearing on the charge of
infringement, and third, with refusing to perform stipulations by
which defendants agreed to assign other patents to plaintiff.
Jurisdiction of the court under the patent laws, which was the sole
basis of jurisdiction, was sustained for the first branch of the
suit, because the claim of infringement
Page 270 U. S. 510
was not frivolous, but substantial, and there was jurisdiction
whether the claim ultimately was held good or bad. The remainder of
the bill was found not sustainable as arising under the patent
laws, because based on contract, and while, under the equity
practice, the parts of the bill were properly joined, such practice
must yield to a jurisdictional statute, and the bill was dismissed
as to its second and third branches.
The result of these cases is that a federal district court is
held to have jurisdiction of a suit by a patentee for an injunction
against infringement and for profits and damages, even though, in
anticipation of a defense of a license or authority to use the
patent, the complainant includes in his bill averments intended to
defeat such a defense. If these averments do not defeat such
defense, the patentee will lose his case on the merits, but the
court's jurisdiction under the patent laws is not ousted. The error
in
Hartell v. Tilghman, supra, was in denying jurisdiction
under the patent laws when the patentee based his action broadly on
his patent and averment of infringement seeking injunction and
damages. His averments, intended to constitute a reply to the
anticipated defense that the defendant was a licensee, did not
change the nature of his declared choice of a suit under the patent
laws. This, under the principle now established by the later cases,
and especially
The Fair v. Kohler Die & Specialty Co.
and
Healy v. Sea Gull Specialty Co., is clear. But the
present qualification of the
Hartell case does not affect
the principle, laid down in
Wilson v. Sandford, that,
where a patentee complainant makes his suit one for recovery of
royalties under a contract of license or assignment, or for damages
for a breach of its covenants, or for a specific performance
thereof, or asks the aid of the court in declaring a forfeiture of
the license, or in restoring an unclouded title to the patent, he
does not give the federal district court jurisdiction of the cause
as one arising under the patent laws. Nor may he confer it in such
a case by
Page 270 U. S. 511
adding to his bill an averment that, after the forfeiture shall
be declared or the title to the patent shall be restored, he fears
the defendant will infringe, and therefore asks an injunction to
prevent it. That was
Wilson v. Sandford. If in that case
the patentee complainant had based his action on his patent right
and had sued for infringement, and by anticipation of a defense of
the assignment had alleged a forfeiture by his own declaration
without seeking aid of the court, jurisdiction under the patent
laws would have attached, and he would have had to meet the claim
by the defendant that forfeiture of the license or assignment and
restoration of title could not be had except by a decree of a court
which, if sustained, would have defeated his prayer for an
injunction on the merits. But when the patentee exercises his
choice, and bases his action on the contract, and seeks remedies
thereunder, he may not give the case a double aspect, so to speak,
and make it a patent case conditioned on his securing equitable
relief as to the contract. That is the principle settled by
Wilson v. Sandford, and is still the law.
It is true that, in Mr. Justice Bradley's dissenting opinion in
Hartell v. Tilghman, supra, page
99 U. S. 559,
he says, in reference to
Wilson v. Sandford, that if the
question were a new one, he would think that it would not oust the
jurisdiction under the patent laws for the complainant to join in a
bill for infringement, as ancillary to the relief sought, an
application to avoid an inequitable license. But no subsequent case
has gone so far, and we are not disposed to depart from the rule of
Wilson v. Sandford, whatever might be our conclusion if it
were a new question. Moreover, the bill in this case, as we have
already fully pointed out, is really not based on threatened
infringement, but on the contracts, and its reference to
infringements is inadequate even to present a bill in the form
suggested by Mr. Justice Bradley.
The judgment of the district court is
Affirmed.