Cortelyou v. Charles Eneu Johnson & Company/Opinion of the Court

This is a suit to restrain an alleged infringement of a patent granted June 22, 1897, for the stencil duplicating machine known as the rotary Neostyle. The plaintiffs below, petitioners here, represent the entire interest in the patent. There is no claim of any infringement by using or selling the patented machines, but of an indirect infringement in the following maner: For the last few years the rotary Neostyle has been sold subject to this license, which was plainly disclosed on the baseboard of the machine: 'License agreement. This machine is sold by the Neostyle Company with the license restriction that it can be used only with stencil paper, ink, and other supplies made by the Neostyle Company, New York City.' The defendant company (which is engaged in the manufacture and sale of ink) is, it is contended, engaged in selling ink to the purchasers of these machines for use thereon; that it is thus inducing a breach of the license contracts, and is responsible as indirectly infringing the patent rights of plaintiffs. The circuit court sustained the contention and entered an interlocutory decree for an injunction and an accounting. 138 Fed. 110. On appeal the circuit court of appeals for the second circuit reversed this decree and remanded the case to the circuit court, with instructions to dismiss the bill (76 C. C. A. 455, 145 Fed. 933), whereupon the case was brought here on certiorari.

The three judges of the circuit court of appeals concurred in reversing the decree of the circuit court on the ground that the evidence was not sufficient to show that the defendant had notice that the machines for which the ink was ordered had been sold under any restrictions, but they differed upon the question whether there was any liability in case sufficient notice of the license agreement had been brought home to the defendant. The majority were of the opinion that the doctrine of contributory infringement, which they conceded to exist, should not be extended beyond those articles which are either parts of a patented combination or device, or which are produced for the sole purpose of being so used, and should not be applied to the staple articles of commerce. In that view of the case, the article supplied being ink, a thing of common use, its sale to a purchaser of the Neostyle machine would be no infringement.

While in E. Bement & Sons v. National Harrow Co. 186 U.S. 70, 46 L. ed. 1058, 22 Sup. Ct. Rep. 747, this court held, in respect to patent rights, that, with few exceptions, 'any conditions which are not in their very nature illegal with regard to this kind of property, imposed by the patentee and agreed to by the licensee for the right to manufacture or use or sell the article, will be upheld by the courts,' it is unnecessary to consider how far a stipulation in a contract between the owner of a patent right and the purchaser from him of a machine manufactured under that right, that it should be used only in a certain way, will sustain an action in favor of the vendor against the purchaser in case of a breach of that stipulation. So, although 'if one maliciously interferes in a contract between two parties, and induces one of them to break that contract to the injury of the other, the party injured can maintain an action against the wrongdoer' (Angle v. Chicago, St. P. M. & O. R. Co. 151 U.S. 1, 13, 38 L. ed. 55, 62, 14 Sup. Ct. Rep. 240), it is also unnecessary to determine whether this states the full measure of liability resting upon a party interfering and inducing the breaking of a contract, for we concur in the views expressed by all the judges of the court of appeals, that there is no sufficient evidence of notice. True, the defendant filled a few orders for ink to be used on a rotary Neostyle, but it does not appear that it ever solicited an order for ink to be so used, that it was ever notified by the plaintiffs of the rights which they claimed, or that anything which it did was considered by them an infringement upon those rights. Further, none of the chief executive officers of the company had knowledge of the special character of the rotary Neostyle machine or the restrictions on the purchase of supplies. The case of the plaintiffs in this respect rests mainly on the testimony of the witness Gerber, who testified that, at the instance of the manager of the Neostyle Company, he wrote to the defendant for a one-pound can of black ink for use on the rotary Neostyle, saying: 'I will be at my office Friday afternoon, between 1:30 and 3:30, and, if convenient, have your representative call at that time.' A salesman of the defendant, named Randall, did call. The witness directed Randall's attention to the restrictions on the single machine he had in his office, and asked if he would have any trouble with the Neostyle Company if he used the defendant's ink; Randall replied in the negative, and added that 'the ink in question was not patented, that anybody could make or use it; that no trouble would come to me from the use of the ink which he sold.' The restriction on the machine shown to Randall was one formerly used by plaintiffs, but which had been discarded prior to this transaction, and for it the present license agreement had been substituted. The restriction shown to Randall stated that the machine was sold 'with the express understanding that it is licensed to be used only with stencil paper and ink (both of which are patented) made by the Neostyle Company of New York city.' Evidently from his reply Randall's attention was not drawn to the question of a patent on the ink. Further, he was not an officer or general agent of the defendant company, but simply a salesman, and it cannot be that this talk with him is notice to and binding on his principal in respect to all future transactions.

After reviewing all the minor considerations to which our attention has been called by the plaintiffs, we see no sufficient reason for disagreeing with the unanimous opinion of the Circuit Court of Appeals in respect to the matter of notice, and its decree is affirmed.