1. A suit between citizens of the same state cannot be sustained
in the circuit court as arising under the patent laws of the United
States where the defendant admits the validity and his use of the
plaintiff's letters patent and a subsisting contract is shown
governing the rights of the parties in the use of the
invention.
2. Relief in such a suit is founded on the contract, and not on
those laws.
The court below had no jurisdiction. The parties were all
citizens of the same state. The suit was founded upon a contract
between them, and did not arise under a statute of the United
States.
Wilson v.
Sandford, 10 How. 99;
Hartshorn
v. Day, 19 How. 211;
Slemmer's Appeal, 58
Pa.St. 164;
Blanchard v. Sprague, 1 Cliff. 288;
Goodyear v. Day, 1 Blatchf. 565;
Merserole v. Union
Paper Collar Co., 6
id. 356;
Goodyear v. Union
India Rubber Co., 4
id. 63;
Burr v. Gregory,
2 Paine 426;
Hill v. Whitcomb, 1 Holmes 317;
Pulte v.
Derby, 5 McLean 328; Curtis, Patents, sec. 496.
When the defendant's original use of a machine or a process for
which letters patent have been granted to another is unlawful, he
is
prima facie an infringer, and the federal jurisdiction
attaches to prevent a violation of a right secured by the laws of
the United States. But where such use is lawful, he is
prima
facie not an infringer, and that jurisdiction does not attach.
The rights involved rest solely upon contract, and it is only when
a breach of it is shown that the continued exercise of them can be
enjoined.
Page 99 U. S. 548
MR. JUSTICE MILLER delivered the opinion of the Court.
This is an appeal from a decree of the Circuit Court of the
Eastern District of Pennsylvania, in which Tilghman, the appellee,
describes himself in his bill as a citizen of that state and the
defendants as citizens of the same state. It thus appears
affirmatively that if the court had jurisdiction of the case, it
was for some other reason than the citizenship of the parties, and
it is argued by appellants that there is no such other ground for
the jurisdiction.
The counsel for appellee, however, insists that it is "a case
arising under the patent laws of the United States," and therefore
cognizable in the circuit courts of the United States on account of
the subject matter of the suit.
Subdivision 9 of section 629 of the Revised Statutes, which
section is devoted to a definition of the powers of that court,
gives it original jurisdiction "of all suits at law or in equity
arising under the patent or copyright laws of the United
States."
This section of the revision is founded on section 55 of the Act
of July 8, 1870, which declares that all actions, suits,
controversies, and cases arising under the patent laws of the
United States "shall be originally cognizable, as well at law as in
equity, in the circuit courts of the United States," and that those
courts shall have power to grant injunctions according to the
course and principles of courts of equity to prevent the violation
of any right secured by patent on such terms as the court may deem
reasonable, and on a decree for infringement complainant shall be
entitled, in addition to profits, to the damages he has sustained
thereby. The language of the act of 1836 is substantially the same
except as
Page 99 U. S. 549
to the damages to be recovered. We are therefore to decide
whether this suit is one arising under the patent laws of the
United States within the meaning of the clause we have cited.
If a man owning a tract of land, his title to which is a patent
from the United States, should sell or lease that land and a
controversy should arise between him and his vendee or lessee as to
their rights in the premises, it could not be said that any suit
brought by the vendor to assert his rights was a suit arising under
the land laws of the United States, and this would be beyond
question if the defendant, admitting the title of plaintiff to the
land, should make no other defense than such as was founded in
rights derived from plaintiff by contract. That is the case before
us, with the variance that plaintiff's title is to a patent for an
invention instead of a patent for land.
His bill begins by a statement that he is the original inventor
and patentee of a process for cutting and engraving stone, glass,
metal, and other hard substances. It is the one known as the
sandblast process.
He then sets out what we understand to be a contract with
defendants for the use by the latter of his invention. He declares
that defendants paid him a considerable sum for the machines
necessary in the use of the invention, and also paid him the
royalty which he asked, for several months, for the use of the
process, which he claims to be the thing secured to him by patent.
He alleges that after this, defendants refused to do certain other
things which he charges to have been a part of the contract, and
thereupon he forbade them further to use his patent process, and
now charges them as infringers.
The defendants admit the validity of plaintiff's patent. They
admit the use of it and their liability to him for its use under
the contract. They set out in a plea the contract as they
understand it, and the tender of all that is due to plaintiff under
it, and their readiness to perform it.
What is there here arising under the patent laws of the United
States? What controversy that requires for its decision a reference
to those laws or a construction of them?
Page 99 U. S. 550
There is no denial of the force or validity of plaintiff's
patent nor of his right to the monopoly which it gives him, except
as he has parted with that right by contract.
The complainant's view of the case is that there was a verbal
agreement that he should prepare and put up in defendants' workshop
ready for use such parts of the machinery as were of special use in
his invention, for which defendants were to pay him at all events.
That after this was done, defendants should take a license for the
use of his invention; that this license was to be the same in its
terms as that given to all other persons who used the process, and
among these were the right on the part of the patentee to visit the
works of the defendants at all times, as well as to inspect their
books, with a view to ascertain the amount of work done on which
royalty was due. Also that once every year the complainant had a
right to fix the tariff of rates to be paid by defendants by
increasing it if he so determined, with no other limitation than
that the increase of rates should apply equally to all licensees of
the patent.
It is established by evidence of which there is no contradiction
that complainant did furnish and put in place the machines, for
which defendants paid him $649. That complainant also furnished a
schedule of the rates of royalty to be paid on the different kinds
of work to which the patented process was to apply, and that
defendants made monthly returns and monthly payments according to
this schedule, which were received by plaintiff without objection.
That besides the machinery purchased of plaintiff, the defendants
had expended about $3,000 in erecting a blower for the use of the
sand-blast of complainant's process.
At this stage of the affair complainant tendered to defendants
two blank forms of license to be signed by both parties, containing
the two conditions we have mentioned. After some fruitless
negotiations, defendants refused to sign these papers, and
complainant thereupon, as we have said, forbade them to use the
process, and on their disregard of this admonition brought his bill
in chancery for an injunction, and for an account of profits and
additional damages.
The argument of counsel is that defendants, having refused
Page 99 U. S. 551
to sign the papers tendered them, are without license or other
authority to use his invention, and are naked infringers of his
rights under the acts of Congress.
The defendants say that they never agreed to accept a license
with the conditions we have mentioned in them; that they never
agreed to permit complainant's agents to inspect all the processes
of their own works, some of which were valuable secrets, nor, after
they had expended thousands of dollars in preparations for the use
of his process, to place themselves under his arbitrary control as
to the prices they should pay for the use of his invention. And
they say that when the machines were in full operation and paid
for, and the schedule of rates had been furnished by complainant
and accepted by them, the contract was complete, and needed no such
written agreement as the one tendered them for signature.
Such were the pleadings and the principal conceded facts on
which the court was called to act, and we pause here to consider
the question of jurisdiction on the case thus stated.
Burr v. Gregory, 2 Paine 426, one of the earliest cases
on this subject, was a bill to procure a decree that the assignment
of a patent by Burnap to Gregory was to the extent of
three-fifteenths for the benefit of complainant, Burr, and to have
a conveyance executed accordingly. Mr. Justice Thompson said that
if the validity of the patent or of the assignment could be drawn
in question, the circuit court might have jurisdiction. But as it
was a matter which grew out of the contract, and there was no
averment of citizenship, the amount prayed for, growing out of the
profits, did not vary the case so as to give jurisdiction. This
decision was made before the act of 1836, but is indicative of the
sound doctrine that controversies arising out of contracts
concerning patent rights did not necessarily belong to the federal
courts.
The next case in chronological order was founded on the act of
1836, the language of which, as we have seen, was on this point
preserved in the act of 1870 and is embodied in the Revised
Statutes. It is the only authoritative construction of the statute
on that point made by this Court, except
Littlefield v.
Perry, 21 Wall. 205, which is in accord with it,
and we think it covers the case under consideration. We refer
to
Page 99 U. S. 552
Wilson v.
Sanford, 10 How. 99, and the opinion was delivered
by Mr. Chief Justice Taney.
The complainant was assignee of the Woodward planing machine
patent, and had licensed the defendants to use one machine upon
payment of $1,400, of which $250 was paid down, and notes payable
in nine, twelve, eighteen, and twenty-four months given for the
remainder. This license contained a provision that if either of the
notes was not punctually paid at maturity, all the rights under the
license ceased and reverted to "Wilson, who became reinvested in
the same manner as if the license had never been made." Upon
failure to pay the first two notes, Wilson brought his bill,
charging that notwithstanding this, the defendants were using the
machine, and thus infringing his patent. He prayed an injunction,
an account, &c.
The bill was dismissed in the court below, and on appeal to this
Court the appeal was dismissed because the amount in controversy
did not exceed $2,000. If, however, it had been a case arising
under the patent laws of the United States, no sum was necessary to
give jurisdiction.
The precise question, therefore, to be decided was whether the
suit arose under the patent laws of the United States, and the
Chief Justice, after reciting the clause in the act of 1836 which
gives the circuit courts jurisdiction in all such cases, proceeds
to discuss that question in this manner: "The peculiar privilege,"
he says,
"given to this class of cases was intended to secure uniformity
of decision in the construction of the act of Congress in relation
to patents. Now the dispute in this case does not arise under any
act of Congress, nor does the decision depend upon the construction
of any law in relation to patents. It arises out of the contract
stated in the bill, and there is no act of Congress providing for
or regulating contracts of this kind. 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 to
Page 99 U. S. 553
be the 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. And whenever a contract is made in
relation to them, which is not provided for and regulated by
Congress, the parties, if any dispute arises, stand upon the same
ground with other litigants as to the right of appeal."
Let us see how closely these remarks and the case to which they
related apply to the present case. In that case, a contract was
made under which the defendant entered on the use of the invention.
This is also true of the case before us. In that case, it is
charged that an act to be performed by the defendant and licensee
under the contract was not performed, to-wit payment of the notes.
In the case before us it is alleged in like manner that the
defendants failed to perform part of the contract, to wit, to sign
a license.
In that case the complainant asserted, as in this, that all
right under the contract had ceased, and he was remitted to his
original rights under the patent, and could therefore sue in the
federal court under the statute; but the court held this to be
erroneous, and that the rights of the parties depended on the
contract and not on the statute. Why does not the same rule apply
to the present case? Wilson's case was stronger than Tilghman's
case, for two reasons:
1. Because the contract was all in writing, and there was no
dispute about its meaning. Here it was in parol, and there is not
only dispute about its meaning, but the rights of the parties
depend almost wholly upon the points in dispute, which have no
relation to the patent laws of the United States.
2. In Wilson's case, there was an express provision in writing
that a failure to pay any note when due forfeited the license and
reinvested Wilson with all his original rights. No such provision
is set up in the contract between Tilghman and the defendants.
In this case, as in that, the defendants had bought the
machine
Page 99 U. S. 554
and paid for it and used it. In this case, as in that, the right
to its further use depended upon the contract, and was to be
determined by its construction and effect. In this, as in that, the
case, in Judge Taney's language,
"does not arise under an act of Congress, nor does the decision
depend upon the construction of any law in relation to patents. The
rights of the parties depend altogether upon common law and equity
principles."
In
Goodyear v. Union India Rubber Company, 4 Blatchf.
63, where the licensees had neglected for three years to pay the
royalty which they had agreed to pay, and refused to permit their
books to be inspected, and where one of the prayers of the bill was
that until they had so accounted and paid the royalty due they
should be enjoined from the use of the invention, Judge Ingersoll
held that the bill stated no case arising under the patent laws of
the United States, but did not make a case for relief on the
contract. Judge Blatchford stated the doctrine still more strongly
in
Merserole v. Union Paper Collar Co., 6
id.
356.
In the case of
Blanchard v. Sprague, 1 Cliff. 288,
decided by Mr. Justice Clifford in 1859, he said:
"No dispute arises in the case under any act of Congress, nor
does the decision depend in any respect on any law of Congress in
relation to patents. On the contrary, it arises entirely out of the
agreement, express or implied, for a license, and the rights of the
parties depend altogether upon the ordinary rules of law. . . .
What the complainant really claims is that he terminated or revoked
the license under the agreement which previously existed between
the parties, by giving the notice, and that the respondent
subsequently continued the use of the machine without any
stipulation as to the rate of tariff."
How precisely descriptive of the case under consideration, in
which Tilghman, claiming that he has terminated at his own option
the arrangement under which the defendants had been operating, can
now sue in the federal court for an infringement in violation of
the acts of Congress. In the case mentioned Judge Clifford held
otherwise.
To the same purport is
Hill v. Whitcomb, decided by
Judge Shepley, and reported in 1 Holmes 317.
Page 99 U. S. 555
It may be conceded that the case of
Brooks v. Stolly, 3
McLean 523, decided by Mr. Justice McLean on the circuit prior to
the act of 1836, is, in some respects, opposed to the authorities
we have cited. But in them it stands alone, and is not supported by
the better reason.
We may be asked, if we concede the complainant's statement of
the verbal agreement to be correct, what remedy has he on it? The
answer is very easy. He can establish his royalty once every year,
and sue at law and recover every month or every year for what is
due. If he desires to assert his right of examining the works of
the defendants, he can, in a proper case made, compel them to
submit to this examination. If he desires to enforce the agreement
for executing a written contract of license, he can bring a suit in
equity for specific performance, and with or without that specific
relief ask the court to enjoin them from using the patented process
until they execute the agreement and comply with its requirements.
All these and perhaps other remedies are open to him to enforce the
contract. He may also file a bill in chancery to have it annulled
or set aside because of the difficulties placed in the way of its
fair execution by the defendants.
Not content, however, with all these remedies, the complainant
assumes that he has, under the condition of things he has proved,
the right in himself to abandon the contract, to treat it as a
nullity, and to charge the defendants as infringers, liable as
trespassers under the act of Congress to pay both profits and
damages.
The analogy of an action of ejectment to recover possession of
land in cases of a broken contract of sale is referred to. The
analogy, however, is imperfect and deceptive. That action is one at
law, depending on the existence of the strict legal title to land
in plaintiff, and the doctrine that the right of possession follows
the title. It is a peculiar action, founded on a peculiar doctrine
limited to real estate, and liable to be defeated in equity by a
bill for specific performance and an injunction.
In the case of a patent, plaintiff does not recover any specific
property, real or personal. He recovers damages or compensation for
the use of his monopoly, and if he has made a bargain
Page 99 U. S. 556
with the defendant, his right to rescind or annul it must depend
on all the equitable circumstances of the case.
Here, where he has sold and received a considerable sum for a
machine of no use for any other purpose; where the defendants have
spent several thousand dollars on other machinery, which is also
valueless except in connection with the use of this process; where
defendants have paid and plaintiff received for many months the
royalty which plaintiff established, and are still ready and
willing to continue payment; and where the contract being in parol
the parties differ about one or two of its minor terms -- we do not
agree that either party can of his own volition declare the
contract rescinded, and proceed precisely as if nothing had been
done under it. If it is to be rescinded, it can be done only by a
mutual agreement, or by the decree of a court of justice. If either
party disregards it, it can be specifically enforced against him,
or damages can be recovered for its violation. But until so
rescinded or set aside, it is a subsisting agreement, which,
whatever it is, or may be shown to be, must govern the rights of
these parties in the use of complainant's process, and must be the
foundation of any relief given by a court of equity.
Such a case is not cognizable in a court of the United States by
reason of its subject matter, and as the parties could not sustain
such a suit in the circuit court by reason of citizenship, this
bill should have been dismissed.
The decree of that court will, therefore, be reversed, with
directions to dismiss the bill without prejudice, and it is
So ordered.
MR. JUSTICE STRONG did not hear the argument nor take any part
in the decision of the case.
MR. JUSTICE BRADLEY, with whom concurred MR. CHIEF JUSTICE WAITE
and MR. JUSTICE SWAYNE, dissenting.
I dissent from the opinion of the Court in this case. I cannot
see the slightest room for doubt as to the jurisdiction of the
circuit court. The suit is a bill in equity, which sets up letters
patent issued to the complainant for a new and useful improvement
in cutting and engraving stone, metal, and glass,
Page 99 U. S. 557
and complains that the defendants are infringing said patent by
using the said process without any license therefor, and praying an
injunction, and decree for profits and damages. The bill also
states the fact that negotiations had passed between the
complainant and the defendants for a license to use the said
invention, but that the defendants had failed to comply with the
conditions, and hence had no right to continue the use, but
persisted in doing so. This is the substance of the bill. It is a
clear case, it seems to me, "arising under the patent laws of the
United States," and is therefore properly cognizable by the circuit
court of the United States under sec. 629, art. 9, and secs. 4919
and 4921 of the Revised Statutes, and the laws from which that
article and those sections were compiled. The cause of action or
ground of relief is the infringement of the patent. The plaintiff
chooses to place himself on that ground alone. By doing so, he runs
the risk of any defense which would show a right to use the
invention, whether license from himself, invalidity of the patent,
noninfringement, or any other proper defense to a suit on a patent.
He states in his bill, as he had a right to do by the rules of
equity pleading, what the supposed defense would be, and answers
it. This anticipation of the defense does not change the nature of
the suit in the least. Perhaps he need not have anticipated the
defense, but might have left the defendants to develop it in their
answer. Certainly in that case the character of the defense would
not have ousted the court of its jurisdiction. If a cause of action
is cognizable by the United States court, the defendant cannot oust
that jurisdiction by his defense to the action. He may defeat the
action, but he cannot destroy the jurisdiction.
It will not do to say that the remedy of the complainant was a
bill for a specific performance of the parol agreement that the
defendants would take a license. Perhaps he had such a remedy. But
he did not choose to pursue it. He waived it by suing as for an
infringement. He chose to take the responsibility of having a right
to put an end to the agreement without juridical aid. Having done
this, his only remedy was to sue on the patent as for an
infringement. He certainly had a right to do this. He was not bound
to sue for specific performance.
Page 99 U. S. 558
Nor was he bound to sue for the avoidance of the supposed
agreement. It may be that it would have been his better remedy. It
may be that the result of the negotiation is to create a defense to
the suit for infringement, amounting to a parol leave and license,
or a license in law. If so, he has only made a mistake in suing as
for an infringement of his patent, and may fail in his action. How
that may be it is unnecessary now to inquire, since the majority of
this Court has decided the case on the question of jurisdiction.
But whether it be so or not, the character of the present suit is
not changed as a suit for injunction and damages for the alleged
infringement.
How, I would ask, could a state court have determined this suit?
Suppose the defense of license, express or implied, had failed,
what would the state court have done? Could it have taken an
account of profits? Could it have assessed damages for the
infringement? Could it have granted an injunction to restrain the
defendants in the use of the invention? This would have been a new
branch of jurisdiction and inquiry for it to have assumed. It is
too obvious for argument, as it seems to me, that no state court
has, or could rightfully take, jurisdiction of the suit.
It is perfectly well settled, I admit, that where a suit is
brought on a contract of which a patent is the subject matter,
either to enforce such contract, or to annul it, the case arises on
the contract, or out of the contract, and not under the patent
laws. But where infringement of the patent is the ground of action,
and redress is sought therefor, the case does arise under the
patent laws, and is cognizable in the federal court -- no matter
what collateral issues may be raised by the defendant. He may set
up that the patent is void, that he does not infringe, that he has
a license, or a release, or whatnot; the federal court is fully
competent to try any of the issues thus made.
The case principally relied on by the majority of the court is
that of
Wilson v.
Sanford, 10 How. 99. But there the bill prayed to
have the license declared void. The Chief Justice said:
"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,
Page 99 U. S. 559
by reason of the forfeiture of the contract, may be sanctioned
by this Court, and for an injunction."
In such a case, it may be that relief is properly to be sought
in the state court. But if the question were a new one, I should
think that where the complainant seeks damages for infringement and
an injunction against the use of the invention, making that the
basis of his suit, it would not be improper, nor oust the
jurisdiction of the federal court, to join in such a bill, as
ancillary to the principal relief sought, an application to avoid
an inequitable license held by the defendant. I see nothing
incongruous in the joinder of such matters in the bill. It seems to
me that the views on this subject, expressed in
Brooks v.
Stolley, 3 McLean 523, are perfectly sound and just. There the
complainant had given a license to use a patented invention,
determinable on nonpayment of the royalty. On failure to pay, he
filed his bill for an injunction and damages, at the same time
stating the granting of the license, and the failure to perform the
conditions of it. Mr. Justice McLean said:
"It is suggested that, as the whole controversy in the case
arises under the contract of license, the parties to which being
citizens of this state, the federal court cannot take jurisdiction.
This objection would be unanswerable, if no right were involved in
the controversy except what arises out of the contract, as, for
instance, the circuit court could take no jurisdiction under the
contract of an action, merely to recover the sums agreed to be paid
by the defendant; but the present aspect of the case, it is not
limited to the contract. The complainants set up their right under
the patent, and allege that the defendant is infringing that right;
that the license affords no justification whatever to the
defendant. The right then of the complainants to an injunction is
not founded by them on the contract, but on the assignment of the
patent. If the object of the bill were merely to enforce the
specific execution of the contract, the circuit court of the United
States could exercise no jurisdiction in the case."
See also Curtis, Patents, sec. 496, to the same
purpose, citing this opinion.
It seems to me, with all due submission, that if we are to have
regard to "the better reason," we shall find it expressed in these
remarks of Mr. Justice McLean.
Page 99 U. S. 560
It may be laid down, I think, as a general principle, that where
a case necessarily involves a question arising under the
Constitution or laws of the United States, and cannot be decided
without deciding that question, it is a case arising under said
Constitution and laws, and may be brought, as the law now stands,
in the circuit court of the United States, although other questions
may likewise be involved which might be tried and decided in the
state courts. I do not believe in the doctrine that the presence of
a question of municipal law in a case which necessarily involves
federal questions can deprive the federal courts of their
jurisdiction. It is too narrow a construction of the judicial
powers and functions of the federal government and its courts.
But in this case the complainant asks no relief in relation to
the supposed agreement between him and the defendants. He places
himself solely on his rights accruing under the patent and on the
defendants' infringement of them. I think, therefore, the
jurisdiction of the circuit court of the United States was
undoubted.