Dale Tile Manufacturing Company v. Hyatt

The original action was brought in a court of the state of New York by Elizabeth A. L. Hyatt, a citizen of New York, and the owner of letters patent for an improvement in illuminated basement and basement extensions, against the Dale Tile Manufacturing Company, Limited, a corporation organized by the laws of New York, upon a written agreement between the parties, dated December 28, 1880, which contained, either in itself or by reference to previous agreements, the following provisions: The agreement began by reciting that letters patent for this invention had been issued to the plaintiff on August 27, 1867, and reissued on August 6, 1878. The plaintiff, on her part, licensed the defendant to make and sell, within certain states and districts, during the full term of the patent, and of any extension or renewal thereof, illuminated basements and basement extensions, and materials therefor; and agreed not to manufacture herself, or to license others to manufacture, within the same territory. The defendant, on its part, acknowledged the validity of the said letters patent; consented that the plaintiff might obtain further reissues thereof when and as often as she should choose, without prejudice to this agreement; and promised to pay her a fee of 70 cents for each square foot of surface in gratings made by the defendant to be used in illuminated basements or basement extensions made and sold by it under the license: provided, however, that until a court should have given a decree sustaining the validity of the above-named patents, the plaintiff should receive a fee of 30 cents only in lieu of the fee of 70 cents; and that if at any time an adverse decision should be rendered against the validity of the patent, and not be appealed from for three months, the fees under this license should cease; and the defendant agreed to make such payments and render accounts to the plaintiff quarterly. It was further stipulated that either party, knowingly violating the agreement, should forfeit all rights under it. The defendant, in its answer, admitted the agreement, and set up sundry breaches thereof by the plaintiff, and, among others, that on September 27, 1881, she obtained from the United States a reissue of her patent, whereby a discontinuance of actions previously brought by her against infringers in the circuit court of the United States became necessary, and she refused to bring new suits against them. The plaintiff afterwards, by leave of court, amended her complaint by alleging the reissue of 1881. By order of the city court of New York, the case was referred to a referee, who found that the plaintiff was the owner of the letters patent issued and twice reissued as aforesaid; that there had been no breach of the agreement on her part; that the defendant made and sold the invention under the license, and rendered quarterly accounts for the payalties down to and including the quarter ending October 31, 1881; that by the account for that quarter there appeared to be due to the plaintiff the sum of $524.55, which the defendant refused to pay; and that in December, 1881, the plaintiff gave notice to the defendant that it had forfeited its license, and withdrew the notice upon its promise to pay the royalties. The defendant requested the referee to find, as a conclusion of law, that by the plaintiff's surrender of the patent on taking out the reissue of 1881 the license held by the defendant was canceled and became of no effect; and also that the court had no jurisdiction of the action, because it involved necessarily and directly the construction of letters patent of the United States. The referee declined so to find, and reported, as his conclusion of law, that the plaintiff was entitled to judgment against the defendant for the sum of $524.55, with interest from November 1, 1881. The referee filed with his report an opinion in which he said that the defense at first proceeded upon the theory that the plaintiff had violated her agreement by not prosecuting and restraining infringers, but that defense was abandoned, because it appeared that she had assumed no such duty; and that 'the defense was finally rested upon this sole ground: That the reissue of the patent in 1881 was entirely void, because it covered much more ground than the patent of 1867 as reissued in 1878, and that therefore the surrender of 1878 left no patent whatever existing;' but that the defendant was not in a position to raise this question, because it could not, in this action to recover the royalies agreed upon, deny the validity of the original patent or of any reissue thereof, so long as it had not been declared void by a court of competent jurisdiction, and while the defendant retained and acted under its license from the plaintiff. The city court of New York gave judgment for the plaintiff on the referee's report. That judgment was affirmed by the court of common pleas, and the defendant appealed to the court of appeals, which affirmed the judgment and remitted the case to the city court of New York. The opinion filed by the court of appeals, and included in the transcript sent up to this court, is mentioned, but not reported in full, in 106 N. Y. 651. The defendant sued out this writ of error, and assigned for error that the state courts, both of original and of appellate jurisdiction, had no power to entertain the issues in this action, because they involved directly and solely the validity of the letters patent reissued by the United States to the plaintiff on September 27, 1881. The plaintiff moved to dismiss the writ of error for want of jurisdiction, and also moved to affirm the judgment.

Edward D. McCarthy, for plaintiff in error.

''Geo. W. Van Slyck'', for defendant in error.

Mr. Justice GRAY, after stating the facts as above, delivered the opinion of the court.